Tax · Other · Lev and Nissim (2004)

Taxable income to income

Long minus short quintile portfolio, value-weighted, market-adjusted. Quarterly, 1951Q3 to 2024Q4.

Expected return · posterior mean, % per quarter

Next quarter

1.08%

95% interval 0.58% to 1.56%

Next year

1.05%

95% interval 0.55% to 1.55%

Next five years

0.96%

95% interval 0.35% to 1.53%

Next quarter

1.06%

95% interval 0.68% to 1.44%

Next year

1.05%

95% interval 0.64% to 1.45%

Next five years

1.02%

95% interval 0.51% to 1.48%

Next quarter

0.95%

95% interval 0.40% to 1.50%

Next year

0.94%

95% interval 0.35% to 1.51%

Next five years

0.89%

95% interval 0.19% to 1.55%

Next quarter

1.18%

95% interval 0.75% to 1.61%

Next year

1.15%

95% interval 0.71% to 1.61%

Next five years

1.09%

95% interval 0.54% to 1.61%

Cumulative market-adjusted return

+1,610% since 1951Q3 · log scale

Window	Mean	Vol.	Sharpe	t
1951Q3–2024Q4	4.26%	8.75%	0.49	4.17
2020Q1–2024Q4	9.89%	8.74%	1.13	2.53
2024Q1–2024Q4	0.93%	9.50%	0.10	0.10
1951Q3–2024Q4	4.62%	7.29%	0.63	5.43
2020Q1–2024Q4	6.42%	7.73%	0.83	1.86
2024Q1–2024Q4	−0.33%	7.34%	−0.05	−0.05
1951Q3–2024Q4	4.06%	10.15%	0.40	3.43
2020Q1–2024Q4	8.55%	9.94%	0.86	1.92
2024Q1–2024Q4	−2.50%	12.11%	−0.21	−0.21
1951Q3–2024Q4	4.89%	7.99%	0.61	5.25
2020Q1–2024Q4	9.23%	10.55%	0.87	1.96
2024Q1–2024Q4	−1.57%	5.80%	−0.27	−0.27

Horizon	Mean	95% interval	P(neg)
Next quarter	0.249	0.133 – 0.357	0.00
Next year	0.241	0.125 – 0.355	0.00
Next five years	0.219	0.079 – 0.349	0.00
Next quarter	0.291	0.186 – 0.397	0.00
Next year	0.288	0.176 – 0.399	0.00
Next five years	0.278	0.140 – 0.406	0.00
Next quarter	0.188	0.079 – 0.297	0.00
Next year	0.185	0.070 – 0.299	0.00
Next five years	0.176	0.038 – 0.305	0.01
Next quarter	0.296	0.188 – 0.405	0.00
Next year	0.290	0.178 – 0.404	0.00
Next five years	0.272	0.134 – 0.402	0.00