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The stock market effects of a securities transaction tax: quasi-experimental evidence from Italy

Listed author(s):
  • Tommasino, Pietro
  • Cappelletti, Giuseppe
  • Guazzarotti, Giovanni

We study the effects on the stock market of a securities transaction tax (STT). In particular, we focus on the recent introduction of a STT in Italy. Indeed, a peculiarity of the Italian STT is that it only concerns stocks of corporations with a market capitalization above 500 million euros. We exploit this feature via a differences-in-differences approach (comparing taxed and non-taxed stocks both before and after the introduction of the new tax). We ?find that the new tax widened the bid-ask spread and increased volatility, while it left transaction volumes and returns substantially unaffected. Results are broadly similar using a regression discontinuity design, in which we confront the performance of stocks just above the threshold with those just below. JEL Classification: G14, G18, H24

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Paper provided by European Central Bank in its series Working Paper Series with number 1949.

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Date of creation: Aug 2016
Handle: RePEc:ecb:ecbwps:20161949
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