IDEAS home Printed from https://ideas.repec.org/a/spt/apfiba/v2y2012i2f2_2_3.html
   My bibliography  Save this article

Transaction tax and market volatility: Evidence from the Taiwan futures market

Author

Listed:
  • Yung-Shi Liau
  • Yi-Chen Wu
  • Hsinan Hsu

Abstract

This paper employs an asymmetric component generalized autoregressive conditional heteroskedasticity (AC-GARCH) model to test the relation between securities transaction tax (STT) and market volatility. Proponents of an STT argue that such a tax will reduce market volatility by discouraging the trading activity of destabilizing short-term traders. In contrast, Song and Zhang (2005) hypothesize that in the markets with relatively higher volatility and larger noise trader participation, an increase in STT will lead to an increase in market volatility. This paper uses daily data on TAIEX futures to test the Song and Zhang (2005) hypothesis. The results reveal that the volatility in high tax periods is larger than that in low tax periods, especially for the part of short-term volatility.

Suggested Citation

  • Yung-Shi Liau & Yi-Chen Wu & Hsinan Hsu, 2012. "Transaction tax and market volatility: Evidence from the Taiwan futures market," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 2(2), pages 1-3.
    • Handle: RePEc:spt:apfiba:v:2:y:2012:i:2:f:2_2_3
    as

    Download full text from publisher

    File URL: http://www.scienpress.com/Upload/JAFB%2fVol%202_2_3.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Capelle-Blancard, Gunther & Havrylchyk, Olena, 2016. "The impact of the French securities transaction tax on market liquidity and volatility," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 166-178.
    2. Eichfelder, Sebastian & Lau, Mona, 2016. "Financial transaction taxes: Announcement effects, short-run effects, and long-run effects," arqus Discussion Papers in Quantitative Tax Research 211, arqus - Arbeitskreis Quantitative Steuerlehre.
    3. Hvozdyk, Lyudmyla & Rustanov, Serik, 2016. "The effect of financial transaction tax on market liquidity and volatility: An Italian perspective," International Review of Financial Analysis, Elsevier, vol. 45(C), pages 62-78.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spt:apfiba:v:2:y:2012:i:2:f:2_2_3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Eleftherios Spyromitros-Xioufis (email available below). General contact details of provider: http://www.scienpress.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.