The impact of the securities transaction taxes on the Chinese stock market
AbstractThis paper analyzes the impact of changes in the securities transaction tax (STT) rate on the local A-shares market in China. We find that, on average, a 22-base-point- increase in the STT rate is associated with about a 28% drop in trading volume, while a 17-base-point- reduction in the STT rate is associated with about a 89% increase in trading volume in the Chinese A-shares market. Both the increases and reductions in the STT rate result in a significant increase in the market return volatility. Besides, the increases in the STT rate have mixed effects on market efficiency, either improving or curbing it. The reductions usually either make the market less efficient or have not effect on it. The empirical results together show that levying the STT on trading is not an effective tool to regulate stock market, at least in this emerging market.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 22695.
Date of creation: 2010
Date of revision: 13 May 2010
Securities transaction taxes; stock market; volatility; trading volume;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-22 (All new papers)
- NEP-MST-2010-05-22 (Market Microstructure)
- NEP-TRA-2010-05-22 (Transition Economics)
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