The Tobin Tax: A Mean-Variance Approach

Bruno Bosco and Alessandro Santoro

FinanzArchiv: Public Finance Analysis, 2004, vol. 60, issue 3, 446-459

Abstract: A Tobin tax (TT) is studied by means of a portfolio model defined over the means and variances of two rates of return (domestic and foreign). When the correlation is negative, the TT is likely to decrease the speculative component of the share of portfolio invested abroad and to increase the hedging component. For a TT to decrease both the components of the share, one needs not only a small expected gain from speculation, but also either a high positive correlation between the two rates of return or a sufficiently large value of the coefficient of variation of the foreign rate.

Keywords: Tobin tax; portfolio analysis; currency speculation (search for similar items in EconPapers)
JEL-codes: F32 F33 F36 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (1)

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