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Does a ‘financial transaction tax’ drive out information mirages? An experimental analysis

Andrea Morone (), Pasquale Marcello Falcone, Simone Nuzzo and Piergiuseppe Morone
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Pasquale Marcello Falcone: University of Rome
Simone Nuzzo: Università degli Studi di Bari Aldo Moro
Piergiuseppe Morone: University of Rome

Journal of Economic Interaction and Coordination, 2020, vol. 15, issue 4, No 2, 793-820

Abstract: Abstract Motivated by the debate over the economic implications of financial transaction taxes, the present study involved a thorough investigation of the impact of such taxes on a financial market of the type described by Camerer and Weigelt (J Bus 64:463–493, 1991), whereby noise traders are unaware of whether privileged information is fluctuating in the market. Two treatment conditions were opposed to a baseline condition in which no tax was levied. The two treatment conditions imposed a transaction tax equal to 0.5% and 1% of each transaction’s market value, respectively. The findings show that: (1) the introduction of a tax did not affect the occurrence of a mirage, (2) the introduction of a tax did not improve market efficiency and (3) the introduction of a tax did not reduce the number of transactions.

Keywords: Experimental asset markets; Information mirages; Financial transaction tax; Market efficiency (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s11403-019-00271-4

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