The effects of Stamp Duty on the Level and Volatility of Equity Prices
This paper investigates the effects of stamp duty - the UK securities transaction tax - on the level and volatility of equity prices. The authors examine the response of the equity market to announcements of changes in stamp duty rates and compare the prices of two assets which are similar in all respects apart from their treatment for stamp duty purposes: American Depositary Receipts (ADRs) and their London Stock Exchange-traded stocks. The findings are consistent with the hypothesis that stamp duty is capitalised in prices. Using univariate GARCH models, the authors find that stamp duty has no effect on volatility, contradicting the key hypothesis put forward by proponents of transaction taxes.
|Date of creation:||Oct 1997|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Web page: http://www.bankofengland.co.uk/
More information through EDIRC
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.:
- Bollerslev, Tim & Engle, Robert F. & Nelson, Daniel B., 1986. "Arch models," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 49, pages 2959-3038 Elsevier.
- Lawrence R. Glosten & Ravi Jagannathan & David E. Runkle, 1993.
"On the relation between the expected value and the volatility of the nominal excess return on stocks,"
157, Federal Reserve Bank of Minneapolis.
- Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. " On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December.
- Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, vol. 5(3), pages 309-327, December.
- Jeffrey A. Frankel, 1993.
"The Internationalization of Equity Markets,"
NBER Working Papers
4590, National Bureau of Economic Research, Inc.
- Eichengreen, Barry & Tobin, James & Wyplosz, Charles, 1995.
"Two Cases for Sand in the Wheels of International Finance,"
Royal Economic Society, vol. 105(428), pages 162-72, January.
- Barry Eichengreen, James Tobin, and Charles Wyplosz., 1994. "Two Cases for Sand in the Wheels of International Finance," Center for International and Development Economics Research (CIDER) Working Papers C94-045, University of California at Berkeley.
- Nicola Anderson & Francis Breedon, 1996. "UK Asset Price Volatility Over the Last 50 Years," Bank of England working papers 51, Bank of England.
- John Y. Campbell & Kenneth A. Froot, 1993.
"International Experiences with Securities Transaction Taxes,"
NBER Working Papers
4587, National Bureau of Economic Research, Inc.
- John Y. Campbell & Kenneth A. Froot, 1994. "International Experiences with Securities Transaction Taxes," NBER Chapters, in: The Internationalization of Equity Markets, pages 277-308 National Bureau of Economic Research, Inc.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Gordon M. Bodnar & Leonardo Bartolini, 1995.
"Are Exchange Rates Excessively Volatile? and What Does "Excessively Volatile" Mean, Anyway?,"
IMF Working Papers
95/85, International Monetary Fund.
- Leonardo Bartolini & Gordon M. Bodnar, 1996. "Are Exchange Rates Excessively Volatile? And What Does "Excessively Volatile" Mean, Anyway?," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 72-96, March.
- Leonardo Bartolini & Gordon M. Bodnar, 1996. "Are exchange rates excessively volatile? And what does "excessively volatile" mean, anyway?," Research Paper 9601, Federal Reserve Bank of New York.
- Poterba, James M. & Summers, Lawrence H., 1988.
"Mean reversion in stock prices : Evidence and Implications,"
Journal of Financial Economics,
Elsevier, vol. 22(1), pages 27-59, October.
- James M. Poterba & Lawrence H. Summers, 1987. "Mean Reversion in Stock Prices: Evidence and Implications," NBER Working Papers 2343, National Bureau of Economic Research, Inc.
- Andrew W. Lo & A. Craig MacKinlay, 1991.
"An Econometric Analysis of Nonsynchronous Trading,"
NBER Working Papers
2960, National Bureau of Economic Research, Inc.
- Andrew W. Lo & Craig A. MacKinlay, . "An Econometric Analysis of Nonsyschronous-Trading," Rodney L. White Center for Financial Research Working Papers 19-89, Wharton School Rodney L. White Center for Financial Research.
- James Tobin, 2003. "A Proposal for Monetary Reform," Eastern Economic Journal, Eastern Economic Association, vol. 29(4), pages 519-526, Fall.
- 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.
- J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1989.
"Positive Feedback Investment Strategies and Destabilizing Rational Speculation,"
NBER Working Papers
2880, National Bureau of Economic Research, Inc.
- De Long, J Bradford, et al, 1990. " Positive Feedback Investment Strategies and Destabilizing Rational Speculation," Journal of Finance, American Finance Association, vol. 45(2), pages 379-95, June.
- Karpoff, Jonathan M., 1987. "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(01), pages 109-126, March.
- Ian Domowitz & Jack Glen & Ananth Madhavan, 1998. "International Cross-Listing and Order Flow Migration: Evidence from an Emerging Market," Journal of Finance, American Finance Association, vol. 53(6), pages 2001-2027, December.
- Paul Kupiec, 1991. "Noise traders, excess volatility, and securities transaction tax," Finance and Economics Discussion Series 166, Board of Governors of the Federal Reserve System (U.S.).
- Wang, Jiang, 1994. "A Model of Competitive Stock Trading Volume," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 127-68, February.
- Werner, Ingrid M & Kleidon, Allan W, 1996. "U.K. and U.S. Trading of British Cross-Listed Stocks: An Intraday Analysis of Market Integration," Review of Financial Studies, Society for Financial Studies, vol. 9(2), pages 619-64.
- Paul H. Kupiec, 1989. "Initial margin requirements and stock returns volatility: another look," Finance and Economics Discussion Series 53, Board of Governors of the Federal Reserve System (U.S.).
- 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.
- Blume, Lawrence & Easley, David & O'Hara, Maureen, 1994. " Market Statistics and Technical Analysis: The Role of Volume," Journal of Finance, American Finance Association, vol. 49(1), pages 153-81, March.
- Stiglitz, J.E., 1989. "Using Tax Policy To Curb Speculative Short-Term Trading," Papers t2, Columbia - Center for Futures Markets.
- Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:71. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publications Team)
If references are entirely missing, you can add them using this form.