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This research aims to explore how tax rate uncertainty affects security prices, investor behavior, and tax payments.

Experimental Evidence of the Effect of Tax Rate Uncertainty on Security Prices, Investor Clienteles, and Tax Payments.

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This research aims to explore how tax rate uncertainty affects security prices, investor behavior, and tax payments.
Laboratory market experiment with differentially taxed riskless securities.
Comparison under conditions of tax rate certainty and uncertainty.
Analysis of investor reactions to different taxation scenarios.
Decreased security prices and increased expected returns for fully and partially taxable securities under tax rate uncertainty.
Impeded formation of investor clienteles leading to less efficient market behavior.
Increased expected tax payments by investors when tax uncertainty is present.

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Experimental analysis reveals tax uncertainty impacts security prices and investor behavior, suggesting significant implications for tax policy.

Collins et al. (1995) studied this question.

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Experimental analysis reveals tax uncertainty impacts security prices and investor behavior, suggesting significant implications for tax policy.