Transaction Taxes and Stock Market Volatility
AbstractThe effect of a securities transaction tax on price volatility is estimated on a sample of 11 years of quarterly data from 14 stock markets in different countries. No effect, positive or negative, is found if the volatility is assumed to be monnotonously increasing or decreasing in the tax rate. If the sample is divided into two clusters of equal size, one with tax rates from zero to 0.34 per cent of the transaction value and the second with tax rates from 0.50 per cent to 2 per cent (1 per cent on the buyer and 1 per cent on the seller), evidence is found that tax rates avovce 0.5 per cent increase volatility whereas low tax rates have no significant effect on volatility.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 25.
Length: 24 pages
Date of creation: Oct 1994
Date of revision:
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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-(0)8-736 90 00
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Taxes; stock markets; volatility;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
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