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Financial Transaction Taxes and Expert Advice

Author

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  • Michele Dell’Era

    (National Bank of Slovakia)

Abstract

This paper models trading on expert advice to study the impact of a financial transaction tax on traders’ information and decisions. The tax worsens expert advice by strengthening experts’ incentives to misreport information. This result advances the debate on tax suitability beyond the conventional arguments and provides a new explanation for the observed decline in informational efficiency after the tax introduction: the tax makes traders less informed. The model also generates testable predictions regarding the tax impact on mean and variance of trading volume. Finally, it sheds light on the relationship between the tax and regulation of expert compensation.

Suggested Citation

  • Michele Dell’Era, 2018. "Financial Transaction Taxes and Expert Advice," Working and Discussion Papers WP 4/2018, Research Department, National Bank of Slovakia.
    • Handle: RePEc:svk:wpaper:1057
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    File URL: https://www.nbs.sk/_img/Documents/PUBLIK/WP_4_2018_Dell_Era_Transaction_Tax_EN.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Financial Transaction Taxes; Expert Advice; Trading;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • 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
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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