RT Journal Article
SR Electronic
T1 Beware the Bounce: Tax Loss Harvesting During a Stock Market Crash
JF The Journal of Beta Investment Strategies
FD Institutional Investor Journals
SP jbis.2022.1.007
DO 10.3905/jbis.2022.1.007
A1 Ben Davis
A1 Tianchuan Li
A1 Vassilii Nemtchinov
YR 2022
UL https://pm-research.com/content/early/2022/04/15/jbis.2022.1.007.abstract
AB We compare three different approaches to mitigating post-crash underperformance risk associated with tax loss harvesting strategies: a stock-bounds approach, a risk model approach, and an enhanced risk model approach, adding extra controls on factors associated with reversal risk. We analyze the reversal risk by conducting a comprehensive sweep, evaluating the performance of 60,000 realistically simulated accounts over the last twenty-five years, and quantifying the extent of pre-tax underperformance during the most stressful periods for index tracking.