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Stamp duty on shares and its effect on share prices

  • Steve Bond


    (Institute for Fiscal Studies and Nuffield College, Oxford)

  • Mike Hawkins

    (Institute for Fiscal Studies)

  • Alexander Klemm

    (Institute for Fiscal Studies)

This paper provides a discussion of stamp duty and its effects. This is followed by an empirical study using changes in the rate of stamp duty in the UK as natural experiments. Because shares will be affected differently depending on how frequently they are traded, we can employ a difference-in-differences methodology. We find that the announcements of cuts in stamp duty had a significant and positive effect on the price of more frequently traded shares compared to other shares. As expected under the efficient markets hypothesis, the implementation of cuts (when at a different date from the announcement) did not affect returns differentially.

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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W04/11.

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Length: 23 pp
Date of creation: Jun 2004
Date of revision:
Handle: RePEc:ifs:ifsewp:04/11
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  1. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
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