Securities Transaction Taxes and Market Quality

Pomeranets, Anna; Weaver, Daniel G.

doi:10.2139/ssrn.1980185

Download This Paper

Open PDF in Browser

Add Paper to My Library

Securities Transaction Taxes and Market Quality

Bank of Canada Working Paper 2011-26

35 Pages Posted: 7 Jan 2012 Last revised: 13 Feb 2013

See all articles by Anna Pomeranets

Daniel G. Weaver

Rutgers Business School

Date Written: February 8, 2013

Abstract

We study changes in market quality variables associated with nine modifications to the New York State Securities Transaction Tax (STT) between 1932 and 1981. We find that when there is an increase in the level of an STT, individual stock volatility increases, bid-ask spreads widen, price impacts are greater, and volume decreases. Our evidence suggests that there is no significant relation between the level of an STT and volatility of portfolios. We examine the propensity of traders to switch trading locations to avoid the tax and find mixed evidence that they will change locations.

Keywords: transaction tax, Tobin tax, market quality, volatility, transfer tax, taxation

JEL Classification: G18, G28, H20

Suggested Citation: Suggested Citation

Pomeranets, Anna and Weaver, Daniel G., Securities Transaction Taxes and Market Quality (February 8, 2013). Bank of Canada Working Paper 2011-26, Available at SSRN: https://ssrn.com/abstract=1980185 or http://dx.doi.org/10.2139/ssrn.1980185