IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Might a Securities Transactions Tax Mitigate Excess Volatility?: Some Evidence From the Literature

  • Markus Haberer

    ()

    (Department of Economics, University of Konstanz)

Registered author(s):

    International financial markets are said to be excessively volatile due to destabilizing speculation and excessive market volume. Transactions taxes might help. From studying the literature we conclude that there must be an optimal market liquidity, which minimizes excess volatility. There are two effects when imposing a transactions tax. Both reduce excess volatility in highly speculative markets when tax rates are small. The total tax effect then is unambiguous. However, in illiquid markets the tax might raise volatility.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://cofe.uni-konstanz.de/Papers/dp04_06.pdf
    Download Restriction: no

    Paper provided by Center of Finance and Econometrics, University of Konstanz in its series CoFE Discussion Paper with number 04-06.

    as
    in new window

    Length: 32 pages
    Date of creation: Sep 2004
    Date of revision:
    Handle: RePEc:knz:cofedp:0406
    Contact details of provider: Postal:
    Fach D 147, D-78457 Konstanz

    Phone: +49-7531-88-2204
    Fax: +49-7531-88-4450
    Web page: http://cofe.uni-konstanz.de

    More information through EDIRC

    Order Information: Web: http://cofe.uni-konstanz.de Email:


    References listed on IDEAS
    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.:

    as in new window
    1. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
    2. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-38, August.
    3. 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.
    4. Cutler, David M & Poterba, James M & Summers, Lawrence H, 1990. "Speculative Dynamics and the Role of Feedback Traders," American Economic Review, American Economic Association, vol. 80(2), pages 63-68, May.
    5. Frank Westerhoff, 2002. "Heterogeneous Traders and the Tobin Tax," Computing in Economics and Finance 2002 51, Society for Computational Economics.
    6. Huang, Roger D. & Cai, Jun & Wang, Xiaozu, 2002. "Information-Based Trading in the Treasury Note Interdealer Broker Market," Journal of Financial Intermediation, Elsevier, vol. 11(3), pages 269-296, July.
    7. Peter L. Bernstein, 1999. "Why The Efficient Market Offers Hope To Active Management," Journal of Applied Corporate Finance, Morgan Stanley, vol. 12(2), pages 129-136.
    8. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    9. John Y. Campbell & Kenneth A. Froot, 1993. "International Experiences with Securities Transaction Taxes," NBER Working Papers 4587, National Bureau of Economic Research, Inc.
    10. Pagano, Marco, 1986. "Endogenous Market Thinness and Stock Price Volatility," CEPR Discussion Papers 146, C.E.P.R. Discussion Papers.
    11. Richard K. Lyons, 2006. "The Microstructure Approach to Exchange Rates," MIT Press Books, The MIT Press, edition 1, volume 1, number 026262205x.
    12. Lux, T. & M. Marchesi, . "Volatility Clustering in Financial Markets: A Micro-Simulation of Interacting Agents," Discussion Paper Serie B 437, University of Bonn, Germany, revised Jul 1998.
    13. John H. Cochrane, 1991. "Volatility Tests and Efficient Markets: A Review Essay," NBER Working Papers 3591, National Bureau of Economic Research, Inc.
    14. Allen, Helen & Taylor, Mark P, 1990. "Charts, Noise and Fundamentals in the London Foreign Exchange Market," Economic Journal, Royal Economic Society, vol. 100(400), pages 49-59, Supplemen.
    15. Robert J. Shiller, 1995. "Conversation, Information, and Herd Behavior," Cowles Foundation Discussion Papers 1092, Cowles Foundation for Research in Economics, Yale University.
    16. Shiller, Robert J, 1979. "The Volatility of Long-Term Interest Rates and Expectations Models of the Term Structure," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1190-1219, December.
    17. Paul H. Kupiec, 1995. "A Securities Transactions Tax And Capital Market Efficiency," Contemporary Economic Policy, Western Economic Association International, vol. 13(1), pages 101-112, 01.
    18. Davidson, Paul, 1972. "Money and the Real World," Economic Journal, Royal Economic Society, vol. 82(325), pages 101-15, March.
    19. Paul Davidson, 2002. "Financial Markets, Money and the Real World," Books, Edward Elgar Publishing, number 2467.
    20. James Tobin, 1989. "Policies for Prosperity: Essays in a Keynesian Mode," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262700360.
    21. Robert J. Shiller, 1980. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," NBER Working Papers 0456, National Bureau of Economic Research, Inc.
    22. Jones, Charles M & Seguin, Paul J, 1997. "Transaction Costs and Price Volatility: Evidence from Commission Deregulation," American Economic Review, American Economic Association, vol. 87(4), pages 728-37, September.
    23. Garfinkel, M.R. & Glazer, A. & Lee, J., 1997. "Election Surprises and Exchange rate Uncertainty," Papers 97-98-15, California Irvine - School of Social Sciences.
    24. 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.
    25. Jones, Charles M & Kaul, Gautam & Lipson, Marc L, 1994. "Transactions, Volume, and Volatility," Review of Financial Studies, Society for Financial Studies, vol. 7(4), pages 631-51.
    26. Robert Z. Aliber & Bhagwan Chowdhry & Shu Yan, 2003. "Some Evidence that a Tobin Tax on Foreign Exchange Transactions May Increase Volatility," Review of Finance, European Finance Association, vol. 7(3), pages 481-510.
    27. James Tobin, 1978. "A Proposal for International Monetary Reform," Eastern Economic Journal, Eastern Economic Association, vol. 4(3-4), pages 153-159, Jul/Oct.
    28. Lyons, Richard K., 1997. "A simultaneous trade model of the foreign exchange hot potato," Journal of International Economics, Elsevier, vol. 42(3-4), pages 275-298, May.
    29. Paul H. Kupiec, 1995. "Noise traders, excess volatility, and a securities transactions tax," Finance and Economics Discussion Series 95-26, Board of Governors of the Federal Reserve System (U.S.).
    30. Stiglitz, J.E., 1989. "Using Tax Policy To Curb Speculative Short-Term Trading," Papers t2, Columbia - Center for Futures Markets.
    31. Thomas Palley, 1999. "Speculation and Tobin taxes: Why sand in the wheels can increase economic efficiency," Journal of Economics, Springer, vol. 69(2), pages 113-126, June.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:knz:cofedp:0406. 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: (Ingmar Nolte)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.