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Does a ‘financial transaction tax’ drive out information mirages? An experimental analysis

Author

Listed:
  • Andrea Morone

    (Università degli Studi di Bari Aldo Moro)

  • Pasquale Marcello Falcone

    (University of Rome)

  • Simone Nuzzo

    (Università degli Studi di Bari Aldo Moro)

  • Piergiuseppe Morone

    (University of Rome)

Abstract

Motivated by the debate over the economic implications of financial transaction taxes, the present study involved a thorough investigation of the impact of such taxes on a financial market of the type described by Camerer and Weigelt (J Bus 64:463–493, 1991), whereby noise traders are unaware of whether privileged information is fluctuating in the market. Two treatment conditions were opposed to a baseline condition in which no tax was levied. The two treatment conditions imposed a transaction tax equal to 0.5% and 1% of each transaction’s market value, respectively. The findings show that: (1) the introduction of a tax did not affect the occurrence of a mirage, (2) the introduction of a tax did not improve market efficiency and (3) the introduction of a tax did not reduce the number of transactions.

Suggested Citation

  • Andrea Morone & Pasquale Marcello Falcone & Simone Nuzzo & Piergiuseppe Morone, 2020. "Does a ‘financial transaction tax’ drive out information mirages? An experimental analysis," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 15(4), pages 793-820, October.
    • Handle: RePEc:spr:jeicoo:v:15:y:2020:i:4:d:10.1007_s11403-019-00271-4
    DOI: 10.1007/s11403-019-00271-4
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