Date of Award
This paper investigates the relationship between book to tax differences and market returns. Prior research has been conducted that shows the ability of book to tax differences to predict future earnings, and this study expands that research to see if book to tax differences have predictive value in terms of actual market returns. This study uses a sample of firms from the Compustat database and runs a regression using book to tax differences and company returns as compared to the market. Results show that book to tax differences do have some predictive value which could potentially allow an investor to "beat the market"; however, further analysis of the data shows that this strategy could be fairly risky for an investor to actually implement.
Hepworth, Chelsea, "The Relationship Between Income Taxes and Market Returns" (2016). Undergraduate Honors Capstone Projects. 550.
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