Asset Returns, Portfolio Choice, and Proportional Wealth Taxation

Battle Count: 62

The paper is primarily a theoretical contribution to tax economics and portfolio theory rather than a quantitative trading paper. However, it has indirect relevance: (1) proves Sharpe ratio invariance under wealth tax, relevant for tax-aware portfolio construction; (2) identifies pricing neutrality conditions that affect asset valuation models; (3) formalizes liquidity frictions from forced tax-driven selling, relevant for market impact modeling; (4) the Security Market Fan concept under heterogeneous taxation is relevant for cross-sectional strategies in taxed jurisdictions. The paper does not propose trading strategies or use ML/statistical models for prediction.

The paper is purely analytical with closed-form results. No code implementation is required for the theoretical results. The mathematical derivations involve standard tools: Ito calculus for GBM, matrix algebra for portfolio optimization, risk-neutral pricing for no-arbitrage results. The three non-neutrality channels (Sections 9.2-9.4) involve more complex algebra but remain analytical. No computational experiments, simulations, or empirical estimation are performed.

Purely analytical/theoretical paper with closed-form mathematical proofs. All results are derived from first principles with explicit assumptions clearly stated. No empirical data or code required. Propositions are proven algebraically and can be independently verified. The paper provides complete notation (Table 1), detailed derivations, and systematic comparison tables (Tables 2-10).