This paper provides an empirical study of the effect of a transaction tax on share prices, using changes in the rate of stamp duty in the UK as quasi-experiments. Because the impact of a stamp duty is expected to depend on how frequently particular shares are traded, we employ a difference-of-differences methodology. We find that announcements of reductions in stamp duty had a significant and positive effect on the price of more frequently traded shares compared to less frequently traded shares. As expected under the efficient-markets hypothesis, the subsequent implementation of previously announced cuts did not affect returns differentially.
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Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 61 (2005) Issue (Month): 3 (November) Pages: 275- Download reference. The following formats are available: HTML,
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Find related papers by JEL classification: G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
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