Asset location decisions observed in practice deviate substantially from the predictions of theoretical models. This paper develops a life cycle model with a progressive tax system to quantitatively evaluate two explanations of the asset location puzzle. We find that taxes matter significantly...

The stock market participation patterns differ significantly in taxable (TAs) and tax-deferred accounts (TDAs). This paper develops a quantitative life-cycle model to study the optimal stock market participation choice for households with assets in both TAs and TDAs. We find that differential...