Are There Tax Effects in the Relative Pricing of U.S. Government Bonds?

Habit Formation and Macroeconomic Models of the Term Structure of Interest Rates

“…We compare the behavior of the model‐implied and empirical real yields using index‐linked bonds. We use the approach suggested by Green and Odegaard (1997) and Buraschi and Jiltsov (2005) to control for the tax implications of the inflation adjustment of the principal amount. We focus this part of the analysis on the sample period after January 29, 1997, which is the date of the first Tips issue.…”

Board compensation practices and agency costs of debt

“…We measure bond liquidity as the length of time that the bond has been outstanding (bond age). Past research has documented that bond prices reflect liquidity premium and more recently issued bonds are more liquid than previously issued bonds (Green and Odegaard, 1997). We also control for firm characteristics in our multivariate regressions.…”

Taxes on Tax‐Exempt Bonds

“…If mutual funds generally avoid below de minimis trades, why do dealers and institutions not actively purchase more market discount bonds? In the Treasury bond market, Green and Ødegaard (1997) show that dealers and large tax‐exempt institutions dominate because they have lower trading costs and can take unlimited interest expenses and loss deductions. Their estimates of implicit tax rates in the Treasury market are zero.…”

“…Our focus is on the effect of federal income and capital gains taxes on municipal bonds faced by a person purchasing a tax‐exempt bond in the secondary market. We also consider only the effect of taxes on bonds held to maturity, following Litzenberger and Rolfo (1984) and Green and Ødegaard (1997). The Internet Appendix discusses the tax treatment of bonds sold prior to maturity 6…”

“…For example, studies using equities find little evidence of implicit tax effects (see, among many others, Boyd and Jagannathan (1994), Fama and French (1998), and Erickson and Maydew (1998)). In Treasury markets, Green and Ødegaard (1997) find that after the 1986 tax reform, the marginal investor in Treasury bonds has a marginal tax rate of zero.…”