Security Transaction Taxes and Market Quality
AbstractWe examine nine changes in the New York State Security Transaction Taxes (STT) between 1932 and 1981. We find that imposing or increasing an STT results in wider bidask spreads, lower volume, and increased price impact of trades. In contrast to theories of STT imposition as a means to reduce volatility, we find no consistent relationship between the level of an STT and volatility. We examine the propensity of traders to switch trading locations to avoid the tax and find no consistent evidence that they will change locations. We do find evidence to suggest that taxes imposed on the par value of stock will result in corporations managing the par value in the direction of minimizing the impact of the tax on investors.
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 11-26.
Length: 51 pages
Date of creation: 2011
Date of revision:
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Econometric and statistical methods; Financial markets; Market structure and pricing;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-12-19 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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