Abstract

http://ssrn.com/abstract=2378347
 


 



The Impact of the French Securities Transaction Tax on Market Liquidity and Volatility


Gunther Capelle-Blancard


Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES)

Olena Havrylchyk


CEPII, Centre d'Etudes Prospectives et d'Info. Internationales, Paris; Université Paris Ouest - Nanterre, La Défense - EconomiX

April 8, 2013


Abstract:     
In this paper, we assess the impact of the securities transaction tax (STT) introduced in France in 2012 on market liquidity and volatility. To identify causality, we rely on the unique design of this tax that is imposed only on large French firms, all listed on Euronext. This provides two reliable control groups (smaller French firms and foreign firms also listed on Euronext) and allows using difference-in-difference methodology to isolate the impact of the tax from other economic changes occurring simultaneously. We find that the STT has reduced trading volume, but we find no effect on theoretically based measures of liquidity, such as price impact, and no significant effect on volatility. The results are robust if we rely on different control groups (German stocks included in DAX and MDAX), analyze dynamic effects or construct a control group by propensity score matching.

Number of Pages in PDF File: 43

Keywords: Financial transaction tax, Securities transaction tax, Tobin tax, Volatility, Liquidity, Financial regulation, Euronext

JEL Classification: G21, H25

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Date posted: January 15, 2014  

Suggested Citation

Capelle-Blancard, Gunther and Havrylchyk, Olena, The Impact of the French Securities Transaction Tax on Market Liquidity and Volatility (April 8, 2013). Available at SSRN: http://ssrn.com/abstract=2378347 or http://dx.doi.org/10.2139/ssrn.2378347

Contact Information

Gunther Capelle-Blancard (Contact Author)
University of Paris 1 Pantheon-Sorbonne - Centre d'Economie de la Sorbonne (CES) ( email )
106-112 Boulevard de l'hopital
Paris Cedex 13, 75647
France
Olena Havrylchyk
CEPII, Centre d'Etudes Prospectives et d'Info. Internationales, Paris ( email )
113 rue de Grenelle
Paris, F-75007
France
Université Paris Ouest - Nanterre, La Défense - EconomiX ( email )
200 Avenue de la République
Nanterre cedex, Nanterre Cedex 92000
France
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