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Discussion Paper Details

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

Author(s): Kristian Rydqvist

Publication Date: March 2010

Keyword(s): ex-dividend day, lottery number checking, rationing, tax arbitrage, turn-of-the-year effect and underpricing

Programme Area(s): Financial Economics

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.

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Bibliographic Reference

Rydqvist, K. 2010. 'Tax Arbitrage with Risk and Effort Aversion -- Swedish Lottery Bonds 1970-1990'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7767