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Quantitative Finance · शब्दावली

Tax drag क्या है?

Definition 15.5 The Desk and the Firm · अध्याय 15 — Finance, Product Control and Tax

The tax drag of a strategy is the reduction in its annual return caused by taxes: transaction taxes on its turnover, withholding taxes on the dividends and interest it receives that it cannot reclaim, and taxes on its gains, for a given investor and jurisdiction.

The return after a transaction tax on purchases of a strategy that earns 8% a year before it, by turnover, for three tax rates. The dotted line is half the return: reached at turnovers of 40, 20 and 8 (). Data: firm.signoff.tax_drag.
Figure 15.2. The return after a transaction tax on purchases of a strategy that earns 8% a year before it, by turnover, for three tax rates. The dotted line is half the return: reached at turnovers of 40, 20 and 8 (Proposition 15.6). Data: firm.signoff.tax_drag.
grossturn-dividendregime 1regime 2regime 3
strategyreturnoveryield
statistical arbitrage12.0401.011.85−-8.003.85
momentum9.061.58.776.007.58
value7.00.83.56.486.606.31
Table 15.2. Returns after tax of three stylised strategies under three illustrative regimes (%): (1) no transaction tax and 15% withholding; (2) 0.5% on purchases; (3) 0.2% on purchases and 15% withholding. Turnover is purchases a year over capital. Data: fm_finance.tax_table.
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