Securities transaction tax and the stock market– an Indian experience
AbstractThis paper studies the effect of Securities Transaction Tax (STT) on the behavior of the returns on the Indian stock market using a switching first order autocorrelation model. It is found that an increase in STT doesn’t influence the return on American Depository Receipts (ADRs) which are dually listed in United States of America and India. The increase in STT doesn’t have a major impact on the returns of the stocks listed on the National Stock Exchange in India whereas it influences the volume of traded shares. Volatility of stocks listed on the National Stock Exchange in India is affected by the change in tax level and thus investors switch from large and medium sized stocks to small sized stocks to mitigate the risk.
Download InfoIf 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.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 42743.
Date of creation: 20 Nov 2012
Date of revision:
Securities Transaction Taxes; Stock Markets; Returns; Risk;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
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.:
- James Tobin, 1978.
"A Proposal for International Monetary Reform,"
Cowles Foundation Discussion Papers
506, Cowles Foundation for Research in Economics, Yale University.
- Shinhua Liu, 2007. "Securities Transaction Tax and Market Efficiency: Evidence from the Japanese Experience," Journal of Financial Services Research, Springer, vol. 32(3), pages 161-176, December.
- Summers, L.H. & Summers, V.P., 1989. "When Financial Markets Work Too Well : A Cautious Case For A Securities Transactions Tax," Papers t12, Columbia - Center for Futures Markets.
- Umlauf, Steven R., 1993. "Transaction taxes and the behavior of the Swedish stock market," Journal of Financial Economics, Elsevier, vol. 33(2), pages 227-240, April.
- Paul H. Kupiec, 1995. "A Securities Transactions Tax And Capital Market Efficiency," Contemporary Economic Policy, Western Economic Association International, vol. 13(1), pages 101-112, 01.
- Roll, R., 1989. "Price Volatility, International Market Links, And Their Implications For Regulatory Policies," Papers t10, Columbia - Center for Futures Markets.
- Stiglitz, J.E., 1989. "Using Tax Policy To Curb Speculative Short-Term Trading," Papers t2, Columbia - Center for Futures Markets.
- Sinha, Pankaj & Mathur, Kritika, 2012. "Evolution of security transaction tax in India," MPRA Paper 40165, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.