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How much does tax erode fund excess returns?

Chen, Zhe; Gallagher, David R; Harman, Graham; Warren, Geoffrey; Xi, Lihui

Description

We model the tax drag from active fund management based on reported monthly holdings of active equity funds. Tax drag erodes 65 percent of the 0.74 percent excess return in Broad Market funds, but only 21 percent of the 1.80 percent excess return in Small-Cap funds for Australian superannuation (pension) fund investors. Tax drag varies with investment style; market state, which is most detrimental during bull markets; and fund turnover. For highincome individual investors, tax drag is...[Show more]

CollectionsANU Research Publications
Date published: 2019
Type: Journal article
URI: http://hdl.handle.net/1885/219303
Source: Accounting and Finance
DOI: 10.1111/acfi.12483

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