Advanced Search
MyIDEAS: Login to save this paper or follow this series

The effects of Stamp Duty on the Level and Volatility of Equity Prices

Contents:

Author Info

  • Victoria Saporta
  • Kamhon Kan

Abstract

This paper investigates the effects of stamp duty - the UK securities transaction tax - on the level and volatility of equity prices. The authors examine the response of the equity market to announcements of changes in stamp duty rates and compare the prices of two assets which are similar in all respects apart from their treatment for stamp duty purposes: American Depositary Receipts (ADRs) and their London Stock Exchange-traded stocks. The findings are consistent with the hypothesis that stamp duty is capitalised in prices. Using univariate GARCH models, the authors find that stamp duty has no effect on volatility, contradicting the key hypothesis put forward by proponents of transaction taxes.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/1997/wp71.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Bank of England in its series Bank of England working papers with number 71.

as in new window
Length:
Date of creation: Oct 1997
Date of revision:
Handle: RePEc:boe:boeewp:71

Contact details of provider:
Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH
Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Email:
Web page: http://www.bankofengland.co.uk/
More information through EDIRC

Related research

Keywords:

References

References listed on IDEAS
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.:
as in new window
  1. Bollerslev, Tim & Engle, Robert F. & Nelson, Daniel B., 1986. "Arch models," Handbook of Econometrics, Elsevier, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 49, pages 2959-3038 Elsevier.
  2. Lo, Andrew W. & Craig MacKinlay, A., 1990. "An econometric analysis of nonsynchronous trading," Journal of Econometrics, Elsevier, Elsevier, vol. 45(1-2), pages 181-211.
  3. Umlauf, Steven R., 1993. "Transaction taxes and the behavior of the Swedish stock market," Journal of Financial Economics, Elsevier, Elsevier, vol. 33(2), pages 227-240, April.
  4. Jeffrey A. Frankel, 1993. "The Internationalization of Equity Markets," NBER Working Papers 4590, National Bureau of Economic Research, Inc.
  5. James M. Poterba & Lawrence H. Summers, 1987. "Mean Reversion in Stock Prices: Evidence and Implications," NBER Working Papers 2343, National Bureau of Economic Research, Inc.
  6. Paul Kupiec, 1991. "Noise traders, excess volatility, and securities transaction tax," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 166, Board of Governors of the Federal Reserve System (U.S.).
  7. Leonardo Bartolini & Gordon M. Bodnar, 1996. "Are exchange rates excessively volatile? And what does "excessively volatile" mean, anyway?," Research Paper 9601, Federal Reserve Bank of New York.
  8. Barry Eichengreen, James Tobin, and Charles Wyplosz., 1994. "Two Cases for Sand in the Wheels of International Finance," Center for International and Development Economics Research (CIDER) Working Papers, University of California at Berkeley C94-045, University of California at Berkeley.
  9. Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, Elsevier, vol. 5(3), pages 309-327, December.
  10. Stiglitz, J.E., 1989. "Using Tax Policy To Curb Speculative Short-Term Trading," Papers, Columbia - Center for Futures Markets t2, Columbia - Center for Futures Markets.
  11. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, Econometric Society, vol. 59(2), pages 347-70, March.
  12. Ian Domowitz & Jack Glen & Ananth Madhavan, 1998. "International Cross-Listing and Order Flow Migration: Evidence from an Emerging Market," Journal of Finance, American Finance Association, American Finance Association, vol. 53(6), pages 2001-2027, December.
  13. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
  14. Werner, Ingrid M & Kleidon, Allan W, 1996. "U.K. and U.S. Trading of British Cross-Listed Stocks: An Intraday Analysis of Market Integration," Review of Financial Studies, Society for Financial Studies, vol. 9(2), pages 619-64.
  15. De Long, J Bradford, et al, 1990. " Positive Feedback Investment Strategies and Destabilizing Rational Speculation," Journal of Finance, American Finance Association, American Finance Association, vol. 45(2), pages 379-95, June.
  16. Nicola Anderson & Francis Breedon, 1996. "UK Asset Price Volatility Over the Last 50 Years," Bank of England working papers 51, Bank of England.
  17. John Y. Campbell & Kenneth A. Froot, 1993. "International Experiences with Securities Transaction Taxes," NBER Working Papers 4587, National Bureau of Economic Research, Inc.
  18. Summers, L.H. & Summers, V.P., 1989. "When Financial Markets Work Too Well : A Cautious Case For A Securities Transactions Tax," Papers, Columbia - Center for Futures Markets t12, Columbia - Center for Futures Markets.
  19. Paul H. Kupiec, 1989. "Initial margin requirements and stock returns volatility: another look," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 53, Board of Governors of the Federal Reserve System (U.S.).
  20. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, Elsevier, vol. 52(1-2), pages 5-59.
  21. Karpoff, Jonathan M., 1987. "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(01), pages 109-126, March.
  22. James Tobin, 2003. "A Proposal for Monetary Reform," Eastern Economic Journal, Eastern Economic Association, vol. 29(4), pages 519-526, Fall.
  23. Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. " On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, American Finance Association, vol. 48(5), pages 1779-1801, December.
  24. Wang, Jiang, 1994. "A Model of Competitive Stock Trading Volume," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 102(1), pages 127-68, February.
  25. Blume, Lawrence & Easley, David & O'Hara, Maureen, 1994. " Market Statistics and Technical Analysis: The Role of Volume," Journal of Finance, American Finance Association, American Finance Association, vol. 49(1), pages 153-81, March.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. "Help for first-time buyers"?
    by chris dillow in Stumbling and Mumbling on 2010-04-13 13:09:12
  2. Against a transactions tax
    by chris dillow in Stumbling and Mumbling on 2009-11-08 12:54:57
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Zsolt Darvas & Jakob von Weizs„cker, 2010. "Financial Transaction Tax: Small is Beautiful," IEHAS Discussion Papers 1019, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  2. Karl Friedrich Habermeier & Andrei Kirilenko, 2001. "Securities Transaction Taxes and Financial Markets," IMF Working Papers 01/51, International Monetary Fund.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:71. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publications Team).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.