The stock market effects of a securities transaction tax: Quasi-experimental evidence from Italy

Giuseppe Cappelletti, Giovanni Guazzarotti and Pietro Tommasino

Journal of Financial Stability, 2017, vol. 31, issue C, 81-92

Abstract: In the aftermath of the financial crisis, in several countries new levies on the financial sector have been proposed and in some cases implemented. We focus in particular on the recent introduction of a securities transaction tax (STT) in Italy. A peculiarity of the Italian STT is that it only concerns stocks of corporations with a market capitalization above € 500 million. We exploit this feature via a differences-in-differences approach – comparing taxed and non-taxed stocks before and after the introduction of the tax – and via a regression discontinuity design – comparing the performance of stocks just above the threshold with those just below. Focusing on the regulated market, we find that the new tax reduced liquidity, but it left transaction volumes and returns substantially unaffected. There is also evidence – although not conclusive – that the tax increased volatility.

Keywords: Securities transaction tax; Market liquidity; Market volatility (search for similar items in EconPapers)
JEL-codes: G14 G18 H24 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: The stock market effects of a securities transaction tax: quasi-experimental evidence from Italy (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:31:y:2017:i:c:p:81-92

DOI: 10.1016/j.jfs.2017.05.003

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