A Tax‐Induced Clientele for Index‐Linked Corporate Bonds

SHALOM HOCHMAN, ODED PALMON

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5 Scopus citations

Abstract

This paper analyzes the circumstances under which tax considerations favor or disfavor the use of index‐linked corporate bonds. Using a model similar to Miller's, investors' choices of assets depend on their tax preferences for interest income versus capital gains and their preferences for the timing of returns. It is concluded that the absence of index‐linked bonds in the U.S. cannot be attributed solely to tax reasons. However, following the 1986 Tax Reform Act, the tax code is expected to disfavor the use of index‐linked bonds. 1988 The American Finance Association

Original languageEnglish (US)
Pages (from-to)1257-1263
Number of pages7
JournalJournal of Finance
Volume43
Issue number5
DOIs
StatePublished - Dec 1988

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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