Impact of a Financial Transaction Tax on a Financial Market

Roman Šperka () and Irena Szarowská
Additional contact information
Roman Šperka: Departament of Informatics and Mathematics, School of Business Administration, Silesian University

No 13, Working Papers from Silesian University, School of Business Administration

Abstract: The aim of this paper is to investigate the impact of financial transaction tax (FTT) on the stability of financial market. The paper presents an agent-based financial market model and simulations, in which agents follow technical and fundamental trading rules to determine their speculative investment positions. The model developed by Westerhoff (2009) was chosen for the implementation and it was extended by FTT and arising transaction costs. As FTT may be defined variously, assets are understood as a tax object in this paper. The model includes direct interactions between speculators due to which they may decide to change their trading behaviour and deals with a technical and fundamental strategy of market participants. Results suggest that the modified model has a tendency to stabilize itself in a long-term if the fundamental trading rules overbear the technical trading method. This could be used, when the bubbles and the crashes occur in a financial market. Assets price would be stabilized, because its value targets near the fundamental value and the volatility would be also minimized. Substantial is setting the FTT at a low rate for market stabilization. If FTT and consequent transaction costs are too high, the financial system destabilizes and the price grows without limit.

Keywords: financial transaction tax; agent-based model; financial market; technical and fundamental analysis; simulation (search for similar items in EconPapers)
JEL-codes: C63 C88 G12 G14 G18 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2015-07-31
New Economics Papers: this item is included in nep-cmp and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.iivopf.cz/images/Working_papers/WPIEBS_13_Sperka_Szarowska.pdf First version, 2015 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:opa:wpaper:0013

Access Statistics for this paper

More papers in Working Papers from Silesian University, School of Business Administration Contact information at EDIRC.
Bibliographic data for series maintained by David Jančar ().