 Tax reforms and stock return volatility: The case of JapanMinoru Hayashida and Hiroyuki Ono Journal of Asian Economics, 2016, vol. 45, issue C, 1-14 Abstract: Although global financial turmoil in recent years has resulted in renewed interest in taxing financial markets, the existing evidence is inconclusive regarding the effect of stock transaction taxes (STT) on stock return volatility. In this respect, Japan provides an excellent opportunity to address the issue, as the country enacted major tax reforms during the long recession beginning in the early 1990s, not only abolishing STT in 1999, but also reducing the capital gains and dividend taxes in 2003. The present paper exploits these tax reform episodes and examines whether and how they affected stock return volatility. In so doing, it employs GARCH-type models using standard daily stock data, as well as HAR models based on realized volatility constructed from high-frequency, intraday data. The estimation results are consistent with the views that, in line with some earlier findings, the STT abolition in 1999 reduced volatility, and that the tax reforms in 2003 also reduced volatility through a cut in the dividend tax, but not in the capital gains tax. Keywords: Tax reform; Stock return volatility; Stock transaction tax; GARCH-type model; Realized volatility; Japan (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:45:y:2016:i:c:p:1-14 DOI: 10.1016/j.asieco.2016.04.002 Access Statistics for this article Journal of Asian Economics is currently edited by C. Wiemer More articles in Journal of Asian Economics from Elsevier |
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