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Transaction costs and volatility on Warsaw Stock Exchange: implications for financial transaction tax

Michał Zator

Bank i Kredyt, 2014, vol. 45, issue 4, 349-372

Abstract: We present the concept of financial transaction tax (Tobin tax, FTT) and describe its potential consequences. We analyse the relation between transaction costs and volatility of prices by presenting empirical evidence from Warsaw Stock Exchange and exploiting the natural experiment of varying tick size. A higher tick size (and thus increased transaction costs) seems to be connected to higher volatility. Since increased transaction costs may be a proxy for the effect of FTT, our findings may be interpreted as an evidence against the stabilizing role of the tax.

Keywords: transaction costs; volatility; Tobin tax; financial transaction tax (search for similar items in EconPapers)
JEL-codes: D23 C33 G10 H30 (search for similar items in EconPapers)
Date: 2014
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Handle: RePEc:nbp:nbpbik:v:45:y:2014:i:4:p:349-372