Prime and Score Premia: Evidence against the Tax-Clientele Hypothesis
分析1983-1992年美国交易所交易的优先股和分离股，发现两者价格之和超过标的股票价格，并检验税收客户假说，但数据不支持该模型。
Primes and scores split the cash flows of a share of stock into dividend and capital gain components, respectively.An analysis of transaction prices reveals that the sum of prime and score prices exceeds the price of their underlying stock.This paper develops a tax-clientele explanation of this premium over the stock price.It tests jointly the clientele effect and an aftertax version of the Black-Scholes option pricing formula.The data reject this joint hypothesis in a manner that suggests the tax-clientele model is not supported. Prime and Score Premia: Evidence against the Tax-Clientele HypothesisFrom 1983 to 1992, primes and scores traded on the American Stock Exchange.Investors were able to purchase these derivatives which split a share of stock into dividend and capital gains components on some widely traded stocks.The prime holder received all dividends paid to the stock and, at some maturity date, the lesser of the value of the stock and the strike price.The score holder received the remaining value of the stock on the maturity elate.i.e., the greater of the excess of the stock price over the strike price.For a limited time after the offering, investors could tender a share of stock in exchange for a score and a prime and at any time before maturity, a score and a prime could he exchanged for a share of stock.The score can be recognized as a European call option on the underlying stock.Furthermore, since a portfolio of one prime and one score replicates the cash flow, from one share of stock, we might expect the sum of the prime and score prices to equal the stock price.In fact, the sum of the prime and score prices significantly exceeds the underlying stock price.In frictionless markets, this premium presents an arbitrage opportunity: investors will buy the stock and short the prime and the score.Jarrow and O'Hara (1989) show that because of transaction costs a riskless arbitrage is not likely to exist.Transactions costs are one possible explanation of the premium addressed in this paper.Another explanation is taxes, which is the focus of this paper.Our work extends earlier efforts in three ways.First, we directly address the issue or why score and prime clienteles may form and describe the link between these clienteles and the premia.Namely, we develop and test a tax-clientele explanation of score and prime premia.Second, while Jarrow and O'Hara use closing price data for five companies, we use transaction data for 26 companies.i.e., for all primes and scores traded over the sample period.Third, we analyze whether arbitrage opportunities exist and test our model using transaction prices.Transaction data are important because theoretical price relationships across securities hold only for simultaneous prices.In markets with limited liquidity, like the market for primes and (although to a lesser extent) the market for scores, closing prices can be far from simultaneous.Our hypothesis can he summarized as follows.If investors face different tax rules, they will usually disagree on the value of derivative securities relative to the price of an underlying security.Furthermore, each tax-bracket clientele will purchase those derivative securities it values most highly.In doing, so the clientele determines the market price of those derivatives.For any one tax bracket, the sum of score and prime valuations must add up to the price of the stock.However, this equality need not hold for market prices when the score •s price is determined by one tax bracket and the prime's price by another.Previous studies on the role of taxation in equity pricing (e.g. the tax effects of dividends 1 and corporate leverage 2 ) have had to overcome several hurdles.First, information conveyed by dividend and leverage decisions might confound efforts to isolate tax effects.Second, diversification considerations, coupled with the uncertainty of dividend payments and interest deductions, might overshadow tax considerations. 3Third, in the case of dividends, the possibility of arbitraging away tax-driven valuation differences might hamper the determination of tax effects on prices. 4 Primes and scores, however, provide a more controlled experiment of tax effects.First.Company specific information should affect derivative securities, such as primes and scores, only through the observable stock price.Second, precise predictions can be made about the size of the 1 See, for example, Eades, Hess, and