Stamp Duty on Shares and Its Effect on Share Prices
This paper provides an empirical study of the effect of a transaction tax on share prices, using changes in the rate of stamp duty in the UK as quasi-experiments. Because the impact of a stamp duty is expected to depend on how frequently particular shares are traded, we employ a difference-of-differences methodology. We find that announcements of reductions in stamp duty had a significant and positive effect on the price of more frequently traded shares compared to less frequently traded shares. As expected under the efficient-markets hypothesis, the subsequent implementation of previously announced cuts did not affect returns differentially.
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Volume (Year): 61 (2005)
Issue (Month): 3 (November)
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- A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.