Abstract
This article shows how investors can obtain superior results from tax-exempt municipal bonds through active management—as much as 20 to 30 basis points in additional annual return. <b><i>The Tax Option in Municipal Bonds</i></b> explores how tax-loss harvesting can be applied to municipal bonds, and provides portfolio managers with a framework for determining how muni bonds perform under such a strategy. “Muni bonds present unique opportunities for tax-loss harvesting,” says co-author <b>Andrew Kalotay</b>, President of <b>Andrew Kalotay Associates</b>, a bond analytics and advisory firm. The article, co-authored by <b>Douglas Howard</b>, Associate Professor at <b>Baruch College</b> in New York, quantifies the collective benefit accruing to investors from tax-loss harvesting over the life of a muni due to the volatility of interest rates. <b>TOPICS:</b>Legal and regulatory issues for structured finance, volatility measures
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