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Transaction Taxes and Stock Market Volatility


  • Lindgren, Ragnar

    (Dept. of Finance, Stockholm School of Economics)


The effect of a securities transaction tax on price volatility is estimated on a sample of 11 years of quarterly data from 14 stock markets in different countries. No effect, positive or negative, is found if the volatility is assumed to be monnotonously increasing or decreasing in the tax rate. If the sample is divided into two clusters of equal size, one with tax rates from zero to 0.34 per cent of the transaction value and the second with tax rates from 0.50 per cent to 2 per cent (1 per cent on the buyer and 1 per cent on the seller), evidence is found that tax rates avovce 0.5 per cent increase volatility whereas low tax rates have no significant effect on volatility.

Suggested Citation

  • Lindgren, Ragnar, 1994. "Transaction Taxes and Stock Market Volatility," SSE/EFI Working Paper Series in Economics and Finance 25, Stockholm School of Economics.
  • Handle: RePEc:hhs:hastef:0025

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    Cited by:

    1. Minoru Hayashida & Hiroyuki Ono, 2011. "Turnover tax, transaction cost and stock trading volume revisited: investigation of the Japanese case," Applied Financial Economics, Taylor & Francis Journals, vol. 21(24), pages 1809-1817, December.
    2. Hayashida, Minoru & Ono, Hiroyuki, 2016. "Tax reforms and stock return volatility: The case of Japan," Journal of Asian Economics, Elsevier, vol. 45(C), pages 1-14.
    3. repec:wfo:wstudy:31819 is not listed on IDEAS

    More about this item


    Taxes; stock markets; volatility;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General


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