A few posters have recently mentioned tax loss selling as...

A few posters have recently mentioned tax loss selling as something contributing to the drop in SP we see in many stocks around May every year, as something likely to be what's happening with AJX right now.

Can anyone else explain to me how the selling could help anyone with their taxes? Here are some of my guesses:

Scenario 1. Big investors who bought much lower during this financial year are manipulating the SP to make it seem like they made less money than they actually did on the ASX. This then lowers their taxable income for FY2014-2015.

Scenario 2. People are selling out because they need the cash to pay their taxes?

Scenario 3. People are selling out to make their actual holding of stocks look smaller? Not sure how this would help their taxes though.

Scenario 4. No idea. any tax guru's here who can enlighten us?


Thanks in advance.