February 26, 1998

The recently enacted capital gains tax rate legislation favored smaller, capital-intensive concerns. The tax rate reduction made cap gains a more attractive vehicle for delivering returns.1 Not surprisingly then, using average return data for stocks in the S&P 600 and the S&P 500 as proxies for small- and large-cap stocks respectively, small caps outperformed in the third quarter (16.2% vs. 7.49%). As such, in the aftermath of the capital gains tax rate reduction, companies now have an incentive to switch their delivery mechanism from dividends to capital gains.

You must have an active account to view these reports. You may register for a trial here

Download Complete Report in PDF Format

Download Complete Report in Word Format