RT Journal Article
SR Electronic
T1 Optimal Tax-Loss-Harvesting Implementation
JF The Journal of Beta Investment Strategies
FD Institutional Investor Journals
SP 75
OP 89
DO 10.3905/jbis.2022.13.2.075
VO 13
IS 2
A1 Kevin Khang
A1 Alan Cummings
A1 Tom Paradise
YR 2022
UL https://pm-research.com/content/13/2/75.abstract
AB Tax-loss harvesting (TLH) is one of the most objectively quantifiable benefits of direct indexing (DI). Motivated by a wide range of TLH implementations in practice, this article examines the strengths and weaknesses of various modes of TLH implementation. We find that the effectiveness of a TLH strategy varies significantly over two margins: 1) the breadth of loss-harvesting opportunities (from a single fund to individual securities) and 2) the frequency of harvesting (from annual to daily). For DI investors who have a regular stream of significant capital gains to offset, DI with daily harvesting offers the maximal TLH effectiveness in all volatility environments.