Post Tax Optimal Investments

Osorio, Maria A.; Settergren, Reuben; Rustem, Berç; Gülpınar, Nalân

doi:10.1007/978-1-4757-5226-7_10

Cited by 4 publications

(3 citation statements)

References 7 publications

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“…We also give a very brief description of the tax rules for the various wrappers analyzed in this paper. For further details, the reader is referred to (Osorio et al 2002(Osorio et al , 2004.…”

Section: Definitions and Notationmentioning

confidence: 99%

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A general framework for multistage mean-variance post-tax optimization

2007

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An investor's decisions affect the way taxes are paid in a general portfolio investment, modifying the net redemption value and the yearly optimal portfolio distribution. We investigate the role of these decisions on multistage mean-variance portfolio allocation model. A number of risky assets grouped in wrappers with special taxation rules is integrated in a multistage financial portfolio optimization problem. The uncertainty on the returns of assets is specified as a scenario tree generated by simulation/clustering based approach. We show the impact of decisions in the yearly reallocation of the investments for three typical cases with an annual fixed withdrawal in a fixed horizon that utilizes completely the option of taper relief offered by banks in UK. Our computational framework can be used as a tool for testing decisions in this context.

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Section: Definitions and Notationmentioning

confidence: 99%

“…The main taxes applicable in this paper are income, capital gains, tax within bond and tax on gross returns (Osorio et al 2002). The tax rules are integrated with the multistage linear and quadratic stochastic models presented in Gulpinar et al (2003) to yield an overall tax and risk-return efficient portfolio.…”

Section: Introductionmentioning

confidence: 99%

A general framework for multistage mean-variance post-tax optimization

2007

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“…In Osorio et al (2002), we develop a post-tax model for investments. In Osorio et al (2004), we consider stochastic-linear versus stochastic-mixed integer linear programming models for post-tax portfolio optimization.…”

Section: Introductionmentioning

confidence: 99%

Tax impact on multi‐stage mean‐variance portfolio allocation

Osorio

Gülpınar

Rustem

et al. 2004

Int Trans Operational Res

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We investigate the sensitivity to tax change of multi-stage portfolio allocation over a discrete time investment horizon. Special taxation rules within wrappers grouped a number of risky assets are integrated with multi-stage linear or quadratic stochastic programming in the mean-variance framework. The uncertainty on the returns of assets is specified as a scenario tree generated by a simulation-based approach. We adjust different values on capital gains tax under different asset bounds and risk levels. The tax impact in the yearly reallocation of the investments for a typical case with an annual fixed withdrawal that utilizes completely the option of taper relief is also explored. Our computational results show that taxes, combined with other effects such as risk and investment upper bounds, have a significant performance impact on portfolio allocation as well as diversification over wrappers. Yet, investment strategies can be made robust to changes in taxation.

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