Evolution of security transaction tax in India
AbstractSecurities Transaction Taxes have received much attention over the last few years with countries and global organizations trying to control the level of speculations, especially since the Global Financial Crisis. This study examines the impact of an increase in the level of securities transaction tax on traded quantity of shares and time series behaviour of stock returns using data from two prominent national stock exchanges of India. We find that when the tax on equity transactions increases from 0.1% to 0.125%, the quantity of traded shares (volume) decreases by more than twenty five percent. Since the volatility of returns on stocks is not constant through time, conditional heteroscedasticity models are used to estimate the volatility of stock returns. The impact of tax on volatility of return on indices is insignificant.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 40165.
Date of creation: 30 Jun 2012
Date of revision:
securities transaction taxes; stock market; returns; traded shares;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-07-29 (Accounting & Auditing)
- NEP-ALL-2012-07-29 (All new papers)
- NEP-PBE-2012-07-29 (Public Economics)
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