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Stamp duty on shares and its effect on share prices

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Author Info

  • Steve Bond

    ()
    (Institute for Fiscal Studies and Nuffield College, Oxford)

  • Mike Hawkins
  • Alexander Klemm

    (Institute for Fiscal Studies)

Abstract

This paper provides a discussion of stamp duty and its effects. This is followed by an empirical study using changes in the rate of stamp duty in the UK as natural experiments. Because shares will be affected differently depending on how frequently they are traded, we can employ a difference-in-differences methodology. We find that the announcements of cuts in stamp duty had a significant and positive effect on the price of more frequently traded shares compared to other shares. As expected under the efficient markets hypothesis, the implementation of cuts (when at a different date from the announcement) did not affect returns differentially.

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File URL: http://www.ifs.org.uk/wps/wp0411.pdf
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Bibliographic Info

Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W04/11.

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Length: 23 pp
Date of creation: Jun 2004
Date of revision:
Handle: RePEc:ifs:ifsewp:04/11

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Related research

Keywords: Stamp duty; transaction tax; Tobin-tax; natural 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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  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. 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).
  3. Thomas Hemmelgarn & Gaetan Nicodeme, 2010. "The 2008 Financial Crisis and Taxation Policy," Taxation Papers 20, Directorate General Taxation and Customs Union, European Commission.
  4. 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.
  5. 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.
  6. Copenhagen Economics, 2011. "Elasticities of Financial Instruments, Profits and Remuneration," Taxation Papers 30, Directorate General Taxation and Customs Union, European Commission.
  7. 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.
  8. 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.
  9. 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.
  10. 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.

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  1. Tobin tax in Wikipedia English ne '')
  2. Tasa Tobin in Wikipedia Spanish ne '')
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