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The impact of Securities Transaction Tax on market quality: Evidence from France and Italy

Author

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  • Filip ?ramko

    (University of Economics in Prague)

Abstract

This paper analyzes two recent securities transaction tax (STT) implementations in France and Italy in order to identify the effects of STT on market quality. The effects are observed on panel data in four periods utilizing several trading activity and market quality measures. Difference-in-Differences are estimated using several control groups including German and Spanish equities. The results suggest significant decrease in trading activity and liquidity in French taxed stocks following the STT levy. The effect of STT on volatility is statistically insignificant across different control groups and estimation periods. The need to account for seasonal effects is also demonstrated. In Italian case, the results are inconclusive due to possible contamination by political events, but the evidence points to decrease in trading activity following the reform. The evidence regarding volatility and liquidity in Italian case is mixed.

Suggested Citation

  • Filip ?ramko, 2015. "The impact of Securities Transaction Tax on market quality: Evidence from France and Italy," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 4(3), pages 52-93, September.
    • Handle: RePEc:sek:jijoes:v:4:y:2015:i:3:p:52-93
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    Citations

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    Cited by:

    1. Capelle-Blancard, Gunther, 2017. "Curbing the growth of stock trading? Order-to-trade ratios and financial transaction taxes," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 49(C), pages 48-73.

    More about this item

    Keywords

    Financial Transaction Tax; Market Quality; Volatility; Liquidity; Securities Transaction Tax;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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