One fundamental and two taxes: when does a Tobin tax reduce financial price volatility?

dc.contributor.authorDeng, Yongheng
dc.contributor.authorLiu, Xin
dc.contributor.authorWei, Shang-Jin
dc.date.accessioned2018-05-23T05:35:00Z
dc.date.issued2018
dc.description.abstractWe aim to make two contributions to the literature on the effects of transaction costs on financial price volatility. First, by augmenting a double differencing approach with a research design with three ingredients (a common set of companies simultaneously listed on two stock exchanges, binding capital controls, and different timing of changes in transaction costs), we obtain a control group that has identical corporate fundamentals as the treatment group. We apply the research design to Chinese stocks that are cross-listed in Hong Kong and Mainland China. Second, we allow transaction costs to have different effects in markets with different maturity. We find a significantly negative relationship, on average, between stamp duty increase and price volatility. However, this average effect masks some important heterogeneity. In particular, when institutional investors have become a significant part of the traders’ pool, we find an opposite effect. Overall, our results suggest that a Tobin tax could work in an immature market, but can backfire in a more developed market.en_AU
dc.format.mimetypeapplication/pdfen_AU
dc.identifier.issn0304-405Xen_AU
dc.identifier.urihttp://hdl.handle.net/1885/143579
dc.provenancehttp://www.sherpa.ac.uk/romeo/issn/0304-405X/..."Author's post-print on open access repository after an embargo period of between 12 months and 48 months" from SHERPA/RoMEO site (as at 21/05/18). This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
dc.publisherElsevieren_AU
dc.rights© 2018 Elsevier B.Ven_AU
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/4.0/
dc.sourceJournal of Financial Economicsen_AU
dc.subjectTobin taxen_AU
dc.subjectTransaction costen_AU
dc.subjectVolatilityen_AU
dc.subjectSpeculationen_AU
dc.subjectLimits to arbitrageen_AU
dc.titleOne fundamental and two taxes: when does a Tobin tax reduce financial price volatility?en_AU
dc.typeJournal articleen_AU
dcterms.accessRightsOpen Accessen_AU
local.contributor.affiliationLiu, Xin, Research School of Finance, Actuarial Studies & Statistics, College of Business and Economics, The Australian National Universityen_AU
local.contributor.authoremailxin.liu@anu.edu.auen_AU
local.contributor.authoruidu5645609en_AU
local.identifier.ariespublicationu3102795xPUB266
local.identifier.doi10.1016/j.jfineco.2018.04.009en_AU
local.identifier.uidSubmittedByu1005913en_AU
local.publisher.urlhttps://www.elsevier.com/en_AU
local.type.statusAccepted Versionen_AU

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