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Stamp Duty on Shares and Its Effect on Share Prices

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Author Info

  • Steve Bond
  • Mike Hawkins
  • Alexander Klemm

Abstract

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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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 61 (2005)
Issue (Month): 3 (November)
Pages: 275-

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200511)61:3_275:sdosai_2.0.tx_2-v

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Web page: http://www.mohr.de/fa

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Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
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Related research

Keywords: stamp duty; transaction tax; quasi-experiment; tax reform;

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References

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  1. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
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Citations

Blog mentions

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  1. "Help for first-time buyers"?
    by chris dillow in Stumbling and Mumbling on 2010-04-13 13:09:12
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Cited by:
  1. Zsolt Darvas & Jakob von Weizsäcker, 2010. "Financial-Transaction Tax: Small Is Beautiful," Policy Contributions 379, Bruegel.
  2. Thomas Hemmelgarn & Gaëtan J.A. Nicodème, 2010. "The 2008 Financial Crisis and Taxation Policy," CESifo Working Paper Series 2932, CESifo Group Munich.
  3. Shawn Fremstad, 2008. "Measuring Poverty and Economic Inclusion: The Current Poverty Measure, the NAS Alternative, and the Case for a Truly New Approach," CEPR Reports and Issue Briefs 2008-36, Center for Economic and Policy Research (CEPR).
  4. Lendvai, Julia & Raciborski, Rafal & Vogel, Lukas, 2013. "Macroeconomic effects of an equity transaction tax in a general-equilibrium model," Journal of Economic Dynamics and Control, Elsevier, vol. 37(2), pages 466-482.
  5. Lensberg, Terje & Schenk-Hoppé, Klaus Reiner & Ladley, Dan, 2012. "Costs and Benefits of Speculation," Discussion Papers 2012/12, Department of Business and Management Science, Norwegian School of Economics.
  6. Jürgen Antony & Michiel Bijlsma & Adam Elbourne & Marcel Lever & Gijsbert Zwart, 2012. "Financial transaction tax: review and assessment," CPB Discussion Paper 202, CPB Netherlands Bureau for Economic Policy Analysis.
  7. Copenhagen Economics, 2011. "Elasticities of Financial Instruments, Profits and Remuneration," Taxation Papers 30, Directorate General Taxation and Customs Union, European Commission.
  8. Danuse Nerudova, 2011. "Taxing the financial sector in the European Union," MENDELU Working Papers in Business and Economics 2011-16, Mendel University in Brno, Faculty of Business and Economics.
  9. Doris Prammer, 2011. "Quality of taxation and the crisis: Tax shifts from a growth perspective," Taxation Papers 29, Directorate General Taxation and Customs Union, European Commission.
  10. European Commission, 2011. "Tax Reforms in EU Member States 2011: tax policy challenges for economic growth and fiscal sustainability," Taxation Papers 28, Directorate General Taxation and Customs Union, European Commission.

Lists

This item is featured on the following reading lists or Wikipedia pages:
  1. Tasa Tobin in Wikipedia (Spanish)
  2. Tobin tax in Wikipedia (English)
  3. Valuutansiirtovero in Wikipedia (Finnish)

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