Tax Arbitrage with Risk and Effort Aversion -- Swedish Lottery Bonds 1970-1990

34 Pages Posted: 5 Apr 2010

See all articles by Kristian Rydqvist

Kristian Rydqvist

State University of New York at Binghamton - School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

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Date Written: March 2010

Abstract

Swedish lottery bonds are valuable tax shelters before the tax reform of 1991. By trading around the coupon lottery, high-tax investors with capital gains from the stock market shift their tax liability to low-tax investors. The uncertainty of the coupon lottery and the effort of verifying the winning lottery bond numbers are a nuisance to tax traders. We investigate how the Treasury (issuer), market makers (banks), and lottery bond investors respond to those frictions.

Keywords: ex-dividend day, lottery number checking, rationing, tax arbitrage, turn-of-the-year effect, underpricing

JEL Classification: G12, G18

Suggested Citation

Rydqvist, Kristian, Tax Arbitrage with Risk and Effort Aversion -- Swedish Lottery Bonds 1970-1990 (March 2010). CEPR Discussion Paper No. DP7767, Available at SSRN: https://ssrn.com/abstract=1583265

Kristian Rydqvist (Contact Author)

State University of New York at Binghamton - School of Management ( email )

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Centre for Economic Policy Research (CEPR)

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European Corporate Governance Institute (ECGI) ( email )

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