Taxation Without Replication
研究了税收如何使衍生品复制指数策略对个人投资者不如直接投资，因为合成股息和资本利得无法享受税收优惠，导致税后收益和夏普比率更低。
It is well known that investors can structure derivatives portfolios to replicate a position in an underlying asset and synthetically create an index fund. While an individual investor can achieve perfect replication on a before-tax basis, taxes make derivatives inferior to direct investment in the index, because synthetically generated dividends and capital gains do not benefit from the preferential tax treatment accorded direct investment in the index. Derivative strategies also have lower after-tax expected returns and Sharpe ratios and are less volatile than the index. Option strategies benefit from a tax inequity favoring low exercise prices but are still inferior to direct investment in the index. Thus, synthetic indexing may be effective on a before-tax or non-taxable basis, but it fails for taxable individual investors because today9s tax code disadvantages derivatives replicating strategies. <b>TOPICS:</b>Derivatives, mutual funds/passive investing/indexing, portfolio construction