the relation between tax rates and pre tax returns direct evidence from the 1981 and 1986 tax rate reductions abstract this study documents one effect of the theory of implicit taxes providing evidence that a change in the tax rate results in a change in pre tax returns yield spreads of pairs of treasury bills maturing in the last week of december and the first week of january are examined year ends not affected by rate changes show a significant positive yield spread between these pairs of bills reflecting an upward sloping yield curve however for year ends coinciding with the tax rate reductions of 1981 and 1986 there is a significant negative yield spread between these pairs of bills

arbitrage clientele effects and the term structure of interest rates this paper derives a new and intuitive estimation procedure for the term structure under potential tax arbitrage no a priori assumptions regarding the equality of the prices and present values of bonds are made the data are employed to determine whether this equality holds and an appropriate estimator is thereby endogenously derived the suggested estimator is based on the optimizing behavior of an investor in a market with frictions and emerges directly from the solution of the dual of the no arbitrage optimization problem in addition the proposed estimator benefits from being both theoretically sound and straightforward to apply

oil and gas trends and implications in malaysia abstract the trends of reserves production and consumption of oil in malaysia to meet the ever increasing demands do not seem to show that oil and gas will be depleted soon contrary to many reports malaysia s net exporter status of oil continues to expand over time for as long as the value of exports is greater than the value of imports only in physical quantities of oil that malaysia s imports exceed exports but this does not mean that malaysia will be a net importer by then given higher prices of exports the value of exports outweighs the value of imports if the current reserves are extracted based on the domestic consumption trend of 1980 2010 malaysia s reserves will last until 2027 but based on the 1998 2010 trend the reserves will be depleted by 2035 malaysia has adopted a four fuel diversification strategy comprising oil gas coal and hydro instead of heavily dependent on oil gas has a huge potential for domestic utilization as well as for exports to increase revenues malaysia is one of the few countries having many types of renewable energy sources malaysia has great potential in biomass utilization as renewable resources mostly from the existing natural forest and planned plantations

the speculative efficiency hypothesis the hypothesis that forward prices are the best unbiased forecast of future spot prices is often presented in the economic and financial analysis of futures markets this paper considers the hypothesis independently of its implications for rational expectations or market efficiency and in order to stress this fact the term speculative efficiency is used to characterize the state envisaged under the hypothesis if a market is subject to efficient speculation the supply of speculative funds is infinitely elastic at the forward price that is equal to the expected future spot price the expected future spot price is a market price determined as the solution to the underlying rational expectations macroeconomic model although the paper is primarily concerned with testing this hypothesis in the foreign exchange market the methodology introduced in the paper is of general application to all futures markets this abstract was borrowed from another version of this item

financial planning for the multinational corporation with multiple goals this paper presents a methodology for analyzing the financing problems raised by uncertain exchange rates and the various barriers to free capital flows the stochastic goal programming model developed allows a way to improve the efficiency with which alternative combinations of corporate strategies various environmental assumptions and financing mechanisms can be evaluated

a dynamic global portfolio immunization strategy in the world of multiple interest rate changes a dynamic immunization and minimax theorem man 5 and khang 9 demonstrate that it is possible to immunize a portfolio of default free assets against unexpected interest rate changes so that at the end of the planning period the investor will realize at least the returns expected at pur chase however this immunization strategy is applicable for the case in which the change in unexpected interest rate occurs only once at the instant after the purchase of the asset obviously the case depicted above is not likely to resemble the real world situation in at least two respects first the interest rate change is likely to occur at any time and second the interest rate change is likely to occur many times during the investor s planning period bierwag 4 deals with the case in which the interest rate change may occur many times during the planning period each occurring at the instant after the beginning of each time period and shows that provided the interest rate changes are small the investor can at the end of the planning period realize the returns expected at purchase by constructing the portfolio whose duration at the begin ning of each period is equal to the length of the remaining planning period thus bierwag s 4 immunization theorem is a local theorem bierwag makes a conjecture that the theorem is not likely to hold true globally this paper shows that the strategy of keeping the portfolio duration calcu lated on the basis of the term structure observed at each moment of time equal to the length of the remaining planning period during the entire planning period guarantees at least the returns expected or promised at purchase regardless of when and how many times interest rate changes occur during the planning period and regardless of sizes of change in the interest rate structure thus the theorem proven in the paper is a global theorem in a very general setting as opposed to bierwag s 4 local theorem a corollary is that bierwag s unconditional im munization policy does not immunize unless all changes in the term structure are university of oregon the author expresses thanks to an anonymous referee whose careful reading of the paper resulted in an improvement

duration measures immunization and utility maximization abstract this paper explores the conditions under which a risk averse investor behaves like an immunizer in choosing the maturity structure of a balance sheet the setting is similar to grove s study in that the liabilities are assumed fixed but differs in the assumed evolution of interest rates m a grove on duration and the optimal maturity structure of the balance sheet bell journal of economics and management science 5 1974 696 709 it transpires that the circumstances under which a risk averse investor behave like an immunizer are not as limited as concluded in grove s study the model thus explains the extensive use of immunization by the business community

are shocks to disaggregated energy consumption in malaysia permanent or temporary evidence from lm unit root tests with structural breaks abstract the objective of this paper is to examine whether energy consumption in malaysia disaggregated by sector and type is stationary or contains a unit root to realize our objective we apply the lagrange multiplier lm family of unit root tests with up to two structural breaks depending on the decision rule for selecting between results in the no break one break and two break cases we find that energy consumption is stationary for between 50 per cent and 70 per cent of the disaggregated energy series and between 25 per cent and 50 per cent of sectors implications for the malaysian government s attempts to reduce fossil fuel consumption are discussed

implied tax rates and the valuation of discount bonds abstract discount bonds afford the investor the opportunity for capital gains if for tax reasons the market is segmented on the demand side investors in lower and lower tax brackets must be attracted when interest rates rise and the supply of discount bonds increases changes in the differential tax on capital gains and interest income also should affect relative demand testing these hypotheses with u s treasury bond data the implied tax rate is found to vary over time in a manner consistent with market segmentation and tax law changes

a new linear programming approach to bond portfolio management a comment an analysis of the dual problem described by ronn 1987 reveals that it provides a powerful and easily interpretable test for the hypothesis of a single class of marginal investors including models of equilibrium based on a representative tax bracket when ronn s empirical tests are interpreted via the dual they lend additional support to his conclusions in providing a strong rejection of the representative tax bracket hypothesis a valid dual lp used to test the hypothesis can be obtained with fewer assumptions than ronn s primal in addition a minor error in ronn s presentation of the dual is corrected

the effect of taxation on immunization rules and duration estimation investments in default free bonds can be insulated from financial loss due to interest rate changes via additive shock by a process known as immunization the literature on this process ignores taxes this manuscript focuses on three issues the first is the development of the tax adjusted immunization process with a comparison to the existing literature the second issue is the microeconomic effect of a shift in only the individual s tax rates on immunization and investment behavior the third issue is the macroeconomic effect of an across the board shift in tax rates on immunization and investment behavior there is general recognition among investors that a portfolio of default free bonds is not entirely riskless the owner of such a portfolio is subject to risk of financial loss due to interest rate changes occurring over the investment holding period to attenuate these financial losses the bond holder can hedge or immunize his investment by adjusting the average duration of the aggregate bond portfdio including reinvested interest and principal payments to equal exactly the remaining length of his investment holding period the bond duration equation utilized in the immunization process depends on the nature of the stochastic process generating the changes in interest rates therefore if an investor is to successfully immunize his portfolio that is earn income at the end of the period no less than the income promised by the market at the beginning of the period the investor must correctly identify the stochastic process and then employ the appropriate duration measure to obtain the average duration of his aggregate bond portfolio since in reality each investor s income is subject to taxes the immunization process should preserve his desired after tax income furthermore not all investors in the united states are subject to the same tax regulations interest and capital gain income earned by institutions with corporate or mutual forms of ownership such as insurance companies and banks are taxed at a common fixed rate however interest and capital gain income earned by trust institutions such as investment funds and trusts are taxed separately with capital gain income taxed at a lower rate than that applied to interest further complicating the tax treatment of investment income is the ability of the investor to amortize or not to amortize any tax liabilities or tax shields arising from purchasing a bond at a discount or a premium because of the variable nature of the united states tax structure several questions arise which are addressed in this paper how are both the immunization process and the duration estimation altered by the presence of different tax rates applied to interest and capital gains income further how are both duration

term structure forecasts of inflation this paper investigates the information in the term structure of interest rates about future inflation using u k data the author finds that at horizons of up to four years the term structure has predictive value for inflation outcomes the term structure could thus provide a guide to the setting of monetary policy copyright 1992 by royal economic society

are negative option prices possible the callable u s treasury bond puzzle market prices for callable treasury bonds often imply negative values for the implicit call option the author considers a variety of possible explanations for these negative values including the treasury s track record in calling bonds optimally tax related effects tax timing options and bond liquidity none of these factors accounts for the negative values although the costs of short selling may explain why these apparent arbitrage opportunities persist over time why these implicit call values become negative in the first place remains a puzzle copyright 1992 by university of chicago press

a vision on the opportunities policies and coping strategies for the energy security and green energy development in malaysia abstract energy security management remains a complex and fragmented interplay between the population growth urbanization economical development and the living environment today green technology application has been the prime contributor and an indispensable factor to preserve the long term reliability of energy supply this agenda has called for an integrated adaptive coordinated environmentally oriented and participatory approach to the protection of renewable resources malaysia endowed with its rich natural resources and diversity recognizes the need to adopt a sound developmental framework to transform the country s energy management landscape into a high quality and excellent level parallel to this development both government and non governmental organizations continue to advocate national efforts to explore alternative energy and improve the dynamic energy growth in a cost effective manner the plan espouses the establishment of ocean energy geothermal power hydropower wind power hydrogen fuel cell nuclear energy biodiesel and bioethanol processing industries the impetus is accompanied by the integration of environmental protection rules and boosted by the implementation of new energy policies the present work attempts to address the opportunities dynamic pressure and coping strategies of energy security and green energy development in malaysia the present and future outlooks of renewable and non renewable energy are elucidated besides the research breakthroughs and joint co operations for the promotion of green energy management are outlined

an international study of tax effects on government bonds it is shown that coupon bonds alone are not sufficient to span time dated claims on ordinary income capital gains and non taxable wealth in an incomplete bond market where the pure dated claims are not spanned by existing bonds marginal rates of substitution between present consumption and pure dated claims on ordinary income capital gains income and non taxable wealth respectively can differ across bondholders however the relative pricing of coupon bonds in each of these countries is shown to be consistent with the tax status of the major non tax exempt holders of government debt

tax effects in term structure estimation this study is a refinement and an extension of an earlier study by mcculloch of tax effects in the regression equation for term structure estimation this study includes tests for tax effects and heteroskedasticity a reconsideration of the need for an instrumental variable and a search for the capital gains tax rate in addition to the ordinary income tax rate there are two major findings 1 statistically significant taxinduced bias in the non tax adjusted equation and 2 evidence that the capital gains tax is misspecified in the tax adjusted equation it is well known e g see 4 2 pp 727 30 and 25 that the yield curve is an imperfect surrogate for the term structure of interest rates and various methods have been developed to estimate the term structure directly by regressing prices on payments in a sample of default free securities 1 since investors are concerned with the after tax payments on securities it is desirable to incorporate tax effects in term structure estimation mcculloch 22 and schaefer 26 29 have employed different approaches to the tax effect problem mcculloch employed the regression approach and searched for a single tax rate

multicriteria decision aid in financial management abstract the financial decisions of an organization are usually included in the context of optimization concerning a long term period there are decisions related to the optimal allocation of funds and decisions related to the optimal financial structure in the short term case the decisions are related to the optimization of stocks cash accounts receivable current liabilities etc the financial theory analyzes these decisions mainly from an optimal point of view the optimal character of such decisions has led researchers to propose operations research techniques to solve the problems that are inherent in such decisions this paper examines the contribution of multicriteria analysis in solving financial decision problems in a realistic context the paper also includes an extensive bibliography on the subject

term structure multiplicity and clientele in markets with transactions costs and taxes the authors investigate term structure with realistic transactions costs and taxes its properties are derived from a certain no arbitrage condition via duality theory in convex programming transactions costs imply an infinite multiplicity of term structures a simple example with realistic transactions costs shows that this multiplicity can induce a valuation range of over 277 basis points transactions costs also allow equilibrium without short sale restrictions the authors find the minimum transactions costs that prevent arbitrage in addition the exact conditions for weak clientele in which investors will not buy some bonds and may not sell any that they already hold are established most research on the pricing of riskless bonds hereafter bonds uses a noarbitrage model equilibrium pricing is based on the assumption that there is no buy and hold investment strategy that provides riskless arbitrage profit however most of these studies ignore transactions costs 2 the clientele model hereafter ss developed by stephen schaefer 19 adopts a no arbitrage assumption na equivalent to the existence of a valuation operator this operator is a vector of discount factors known as the term structure ss shows that na implies the existence of a tax bracket specific term structure that ensures that the bonds after tax present values do not exceed their prices ss also shows that in markets with spanning positive term structures consistent with na will not exist for some brackets see his example in subsection iva below investors in such brackets would have arbitrage opportunities to resolve this na violation and make equilibrium feasible ss assumes a prohibition on shorting this implies clientele effects in the usual sense i e investors in some brackets hold some but not all bonds there may be however a bracket in which investors hold positive amounts of all bonds this would be a

multiple criteria decision making combined with finance a categorized bibliographic study abstract this paper provides a categorized bibliography on the application of the techniques of multiple criteria decision making mcdm to problems and issues in finance a total of 265 references have been compiled and classified according to the methodological approaches of goal programming multiple objective programming the analytic hierarchy process etc and to the application areas of capital budgeting working capital management portfolio analysis etc the bibliography provides an overview of the literature on mcdm combined with finance shows how contributions to the area have come from all over the world facilitates access to the entirety of this heretofore fragmented literature and underscores the often multiple criterion nature of many problems in finance

option pricing with differential interest rates the classic option pricing model is generalized to a more realistic imperfect dynamically incomplete capital market with different interest rates for borrowing and for lending and a return differential between long and short positions in stock it is found that in the absence of arbitrage opportunities the equilibrium price of any contingent claim must lie within an arbitrage band the boundaries of an arbitrage band are computed as solutions to a quasi linear partial differential equation and in generals each end point of such a band depends on both interest rates for borrowing and for lending this in turn implies that the vector of concurrent equilibrium prices of different contingent claims even claims that are written on different underlying assets must lie within a computable arbitrage oval in the price space article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

tax induced clientele effects in the market for british government securities abstract this paper develops a new methods for measuring tax effects in bond markets and presents empirical results for british government securities the basic idea is to construct a least cost portfolio which for investors in a given tax bracket dominates a given bond a portfolio is said to dominate a bond if it provides cash flows which are at least as great in every period and has a lower price in effect our method calculates an upper bound on the value of a bond to investors in a given tax bracket the results demonstrate i the existence of clientele effects and ii the absence of an effective tax rate

models of the yield curve and the curvature of the implied forward rate function abstract we examine several alternative models of the uk gilt yield curve using daily data for the period 12 july 1996 10 february 2010 we select the best models according to two criteria low out of sample errors in pricing bonds and low curvature of the implied forward rate curve function we suggest additions to some of the models that significantly improve their performance some of the new models out perform those typically used by the central banks in particular this paper suggests that the model used by the canadian central bank which both outperforms other models and is particularly easy to estimate is well suited to the uk gilt market

municipal debt and marginal tax rates is there a tax premium in asset prices we study the marginal tax rate incorporated into short term municipal rates using municipal swap market data using an affine model we identify the marginal tax rate and the credit liquidity spread in 1 week tax exempt rates as well as their associated risk premia the marginal tax rate averages 38 0 and is related to stock bond and commodity returns the tax risk premium is negative consistent with the strong countercyclical nature of after tax fixed income cash flows these results demonstrate that tax risk is a systematic asset pricing factor and help resolve the muni bond puzzle

a maxmin policy for bond management a simple immunization problem is formulated as a maxmin optimal control problem and analytically solved by means of dynamic programming the optimal control law namely the immunization policy turns out to be quite different from any duration based immunization policy moreover it is seemingly able to discriminate between favourable and unfavourable changes in the yield curve

bond pricing in markets with taxes abstract two types of equilibrium models in bond markets with taxes exist the clientele model by schaefer and the litzenberger rolfo s model this paper reviews the two models in two frameworks utility arguments and no arbitrage arguments both show that schaefer s is more realistic

bond returns liquidity and missing data this paper examines holding period returns to constant duration portfolios of u s govern ment notes and bonds and measures the return premium generated by liquidity differences in bonds the approach compares constant duration portfolios constructed in two distinct ways one using only bonds issued in the most recent treasury auction one using all other bonds comparisons of the resulting series are made meaningful by choosing narrow du ration ranges in the portfolio formation procedure this in turn induces a missing data problem in the created time series parameters of return distributions are therefore estimated employing a maximum likelihood framework that explicitly accounts for the missing data it is estimated that recently issued bonds are priced to return a premium of around 55 basis points per annum over otherwise equivalent instruments

the decline in idiosyncratic values of us treasury securities abstract unique features and market frictions can lead to idiosyncratic pricing for some us treasury securities this study uses a linear programming lp model to measure aggregate idiosyncratic pricing of t notes and t bonds from 1980 to 2016 we document an average idiosyncratic pricing of 0 11 per 100 par as compared to an average bid ask spread of 0 08 further idiosyncratic pricing declined dramatically from the early 1980s to the 2010s empirical evidence suggests that the 1986 tax reform act increasing issue sizes and improving market liquidity contribute to the decline at the individual security level we identify factors contributing to and mitigating idiosyncratic pricing

a new linear programming approach to bond portfolio management this paper derives and tests a new linear programming lp approach to bond portfolio management the model elicits possible tax clientele effects in the pricing of u s gov ernment coupon bonds and simultaneously derives the optimal tax specific bond portfolio analytically the model derives these results by exploiting for a given tax bracket the price differential of an after tax stream of cash flows it accomplishes this objective by purchasing at the ask price underprieed bonds for the specific tax bracket while sim ultaneously selling at the bid price overpriced bonds the model requires that the net cash flow inclusive of purchased and sold bonds be nonnegative at all future dates the problem s formulation standardizes the position taken in each bond to a maximum of one unit one of the model s appealing features is the parsimonious number of required calcu lations only one lp program need be run per tax bracket in addition to obtaining an optimally chosen tax specific bond portfolio the model also measures the after tax term structure of spot u s government interest rates for both tax exempt and taxable investors finally the superior monthly holding period rates of return on the optimal taxspecific bond portfolio demonstrate an important property ofthe model s output

taxes capital structure and bondholder clienteles despite much recent progress financial theory has yet to explain the connection if any between the u s tax code and many observed characteristics of corporate bonds empirically why is there no single tax rate equating yields on corporate bonds with yields on tax exempt municipal bonds of apparently identical risks and maturities 2 specifically why does the spread in yields between corporate and municipal bonds divided by the yield on corporates a conventional measure of the marginal tax rate on corporates decrease with increasing risk and maturity more generally why are different types of bonds evidently held by clienteles of investors in tax clienteles for corporate bonds are identified in a competitive financial equilibrium under an asymmetric corporate income tax with interest preceding principal state contingent bonds with higher coupon yields are issued by firms with higher pretax cash inflows per dollar of nondebt tax shield purchased by investors in lower tax brackets and implicitly priced at lower marginal tax rates on these bonds all investors earn tax induced surpluses by contrast all other bonds have implicit tax rates typically equal to the corporate rate and yield for many investors no tax induced surpluses we gratefully acknowledge the helpful comments of george constantinides kose john merton miller jim scott marti subrahmanyam and participants in seminars at baruch chicago columbia houston michigan nyu rutgers usc washington wharton the american finance association the western finance association and the johnson symposium on taxes and finance at wisconsin george constantinides was especially helpful 1 the most notable contribution is miller 1977 other recent papers include chen and kim 1979 kim lewellen and mcconnell 1979 deangelo and masulis 1980a 1980b taggart 1980 kim 1982 auerbach and king 1983 and talmor haugen and bornea 1985 black 1971 anticipates an equilibrium with clienteles 2 schaefer 1982a identifies tax induced clienteles of bondholders in the british gilt market van horne 1982 reports that implicit tax rates vary over time as the supply of discount bonds changes additional evidence is cited in trczinka 1982

lease valuation when taxable earnings are a scarce resource in this paper we examine leasing as a tax arbitrage instrument analysis of a sample of uk leases presented in this paper suggests that lessors earn large positive npvs our theoretical model seeks to explain these positive npvs in terms of a market price for a scarce resource that we identify as scarce taxable earnings using these prices the model permits a lessor to determine whether the profitability of a proposed set of lease contracts can be improved by writing e different set of contracts that makes better use of the lessor s taxable earnings there may be two reasons why an initial portfolio of contracts may be suboptimal either there may be clienteles or the leasing market may be inefficient subsequently we discuss reasons why the leasing market may be characterized by clienteles and using two different samples of leases we test whether the leasing market is segmented and efficient in this paper we examine leasing as a tax arbitrage instrument with asymmetrical tax positions between lessors and lessees there will be positive net present values npvs to lease transactions see myers dill and bautista 21 analysis of a sample of united kingdom uk leases presented in this paper suggests that lessors earn large positive npvs our theoretical model seeks to explain these positive npvs in terms of a market price for a scarce resource that we identify as scarce taxable earnings there are two implications of our model one for financial intermediaries that act as lessors and the other for financial economists interested in the leasing market the model permits a lessor to determine whether the profitability of a proposed set of lease contracts can be improved upon by writing a different set of contracts that makes better use of the lessor s taxable earnings there may be two reasons why an initial portfolio of contracts that a lessor is about to write may be suboptimal either there may be clienteles because the leasing market

when can you immunize a bond portfolio abstract this paper presents a condition equivalent to the existence of a riskless shadow asset that guarantees a minimum return when the asset prices are convex functions of interest rates or other state variables we apply this lemma to immunize default free and option free coupon bonds and reach three main conclusions first we give a solution to an old puzzle why do simple duration matching portfolios work well in empirical studies of immunization even though they are derived in a model inconsistent with equilibrium and shifts on the term structure of interest rates are not parallel as assumed second we establish a clear distinction between the concepts of immunized and maxmin portfolios third we develop a framework that includes the main results of this literature as special cases next we present a new strategy of immunization that consists in matching duration and minimizing a new linear dispersion measure of immunization risk

arbitrage pricing transaction costs and taxation of capital gains abstract this paper examines one of the few cases of seemingly redundant securities sets of three government bonds with the same maturity date within the bounds on relative bond prices established by tax exempt investors in a market with proportional transaction costs the taxation of capital gains on the basis of realization has a significant impact on relative prices the empirical evidence supports the tax option effect discussed by constantinides and ingersoll but does not generally support the segmented tax clientele equilibrium discussed by schaefer

immunization as a maxmin strategy the purpose of this paper is to broaden the analysis of immunization when it is viewed as amaxmin strategy several results are demonstrated which provide a new interpretation of maxmin strategy by using a more general theory of lagrangians we clarify the exact assumptions required for the duration strategy and the maxmin strategy to be equivalent in a world with taxes it is shown that in a world with taxes the immunization strategy requires the portfolio to satisfy a constraint about the bond to be included in addition to the duration constraint

valuation of risky assets in arbitrage free economies with frictions this paper derives a framework for arbitrage models in markets with frictions it generalizes the existence of a valuation operator to such markets as in perfect markets the valuation operator is a linear operator and its existence is implied by the no arbitrage condition in imperfect markets the valuation operator is individual specific and depends on the agent s position in the market the methodology employed in the paper is duality in convex programming

tax clienteles and optimal capital structure under uncertainty this article demonstrates that investors heterogeneous tax status implies that they value bonds differently at the margin due to asymmetric personal taxes high risk bonds generate a higher amount of taxable income than low risk bonds and are therefore held by investors in low tax brackets in such a setting firms can increase their value by choosing a capital structure that attracts a particular bondholder clientele the author analyzes how bondholder clienteles change as the uncertainty about a bond s final payoff is resolved over time and shows how tax clientele effects influence firms capital structure decisions copyright 1990 by the university of chicago

immunization in markets with tax clientele effects evidence from the canadian market empirical immunization studies have considered the efficacy of immunization strategies in which the durations of assets and of liabilities are equated against a strategy involving maturity matching however all these studies have ignored tax effects in the presence of tax clientele effects immunization requires that the portfolio consists only of bonds that are correctly priced for a particular clientele testing for these effects therefore requires the identification of the correctly priced bonds for the investors in the clientele however since bond prices contain noise determining these bonds is still an unresolved problem consequently an empirical test of the magnitude of the error caused by ignoring taxes may be an impossible task in some markets and indeed has never been conducted the canadian bond market provides perfect laboratory conditions for such a test tax clientele effects are present in the canadian market and among the clienteles is a representative clientele this paper examines the tax effects on immunization strategies the results show that the error caused by ignoring tax effects is not negligible and practitioners should use immunization with reference to tax effects