The Impact of the French Securities Transaction Tax on Market Liquidity and Volatility

Gunther Capelle-Blancard and Olena Havrylchyk

No 2014-27, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: In this paper, we assess the impact of the securities transaction tax (STT) introduced in France in 2012 on market liquidity and volatility. To identify causality, we rely on the unique design of this tax that is imposed only on large French firms, all listed on Euronext. This provides two reliable control groups (smaller French firms and foreign firms also listed on Euronext) and allows using difference-in-difference methodology to isolate the impact of the tax from other economic changes occurring simultaneously. We find that the STT has reduced trading volume, but we find no effect on theoretically based measures of liquidity, such as price impact, and no significant effect on volatility. The results are robust if we rely on different control groups (German stocks included in DAX and MDAX), analyze dynamic effects or construct a control group by propensity score matching.

Keywords: Financial transaction tax; Securities transaction tax; Tobin tax; Volatility; Liquidity; Euronext. (search for similar items in EconPapers)
JEL-codes: G21 H25 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2014
New Economics Papers: this item is included in nep-cfn, nep-eur, nep-mst and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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http://economix.fr/pdf/dt/2014/WP_EcoX_2014-27.pdf (application/pdf)

Related works:
Journal Article: The impact of the French securities transaction tax on market liquidity and volatility (2016)
Working Paper: The impact of the French securities transaction tax on market liquidity and volatility (2016)
Working Paper: The impact of the French securities transaction tax on market liquidity and volatility (2016)
Working Paper: The Impact of the French Securities Transaction Tax on Market Liquidity and Volatility (2014)
Working Paper: The Impact of the French Securities Transaction Tax on Market Liquidity and Volatility (2014)
Working Paper: The Impact of the French Securities Transaction Tax on Market Liquidity and Volatility (2013)
Working Paper: The Impact of the French Securities Transaction Tax on Market Liquidity and Volatility (2013)
Working Paper: The Impact of the French Securities Transaction Tax on Market Liquidity and Volatility (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2014-27

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