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Securities Transaction Taxes and Market Quality

Anna Pomeranets

Bank of Canada

Daniel G. Weaver

Rutgers Business School

February 8, 2013

Bank of Canada Working Paper 2011-26

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.

Number of Pages in PDF File: 35

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

JEL Classification: G18, G28, H20

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Date posted: January 7, 2012 ; Last revised: February 13, 2013

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: http://ssrn.com/abstract=1980185 or http://dx.doi.org/10.2139/ssrn.1980185

Contact Information

Anna Pomeranets
Bank of Canada ( email )
234 Wellington Street
Ottawa, Ontario K1A 0G9
Daniel G. Weaver (Contact Author)
Rutgers Business School ( email )
94 Rockafeller Road
Piscataway, NJ 08854
United States
848.445.5644 (Phone)
732.445.2333 (Fax)
HOME PAGE: http://weaver.rutgers.edu
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