The implications of our finding is that VaR is a possible proxy for tax loss selling
that is priced because of potential tax benefits.
Ask potential managers if they are willing to work with you to do tax loss selling
in individual client accounts.
Tax loss selling
also has been significant this year, the first year since the 1990 bear market that investors have had significant losses they could use for income tax purposes by simply selling their losers.
It is believed that tax loss selling
by mutual funds was, therefore, vigorous and often at fire-sale prices as funds managers raced to minimize realized gains before closing the books in October.
Wachtel (1942), Branch (1977), Roll (1981), and Keim (1983) suggest the tax loss selling
hypothesis which asserts that each December individual investors sell common stocks declining in value during the year to offset other realized taxable gains.
The flipping of the calendar year brings tax loss selling
, "Santa Claus" rallies, and the "January Effect.
1) A popular theory explains this by tax loss selling
In the December recommendation, The Acker Letter stated , "Alpha Pro Tech's stock price appears to be more reflective of recent market uneasiness and tax loss selling
than of the Company's recent bottom line performance and anticipated growth.
The way the group should evolve would be most making lows coincident with the stock market (final margin selling) and even the heavy tax loss selling
due in November-early December won't take them back to October lows.
In a recent edition of their morning stock market report (dated 10/23/98), the company provided helpful information to its members and trial members on how tax loss selling
strategies may help save you money.
Levi also noted that "although it is our policy not to comment on our stock price, the company has observed a significant decrease in the company's stock price during the past few weeks and does not know of any reasons for this decline other than concerns over the retail business in general or possible tax loss selling
of the stock prior to year end.
Management is being advised to time the NASDAQ SmallCap listing after year-end, thus avoiding tax loss selling
, and begin trading in early 1996.