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The impact of a financial transaction tax on stylized facts of price returns—Evidence from the lab

  • Huber, Jürgen
  • Kleinlercher, Daniel
  • Kirchler, Michael
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    As the introduction of financial transaction taxes is increasingly discussed by political leaders we explore possible consequences such taxes could have on markets. Here we examine how “stylized facts”, namely fat tails and volatility clustering, are affected by different tax regimes in laboratory experiments. We find that leptokurtosis of price returns is highest and clustered volatility is weakest in unilaterally taxed markets (where tax havens exist). Instead, tails are slimmest and volatility clustering is strongest in tax havens. When an encompassing financial transaction tax is levied, stylized facts hardly change compared to a scenario with no tax on all markets.

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    Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

    Volume (Year): 36 (2012)
    Issue (Month): 8 ()
    Pages: 1248-1266

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    Handle: RePEc:eee:dyncon:v:36:y:2012:i:8:p:1248-1266
    Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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