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

Pietro Tommasino, Giuseppe Cappelletti and Giovanni Guazzarotti

No 1949, Working Paper Series from European Central Bank

Abstract: We study the effects on the stock market of a securities transaction tax (STT). In particular, we focus on the recent introduction of a STT in Italy. Indeed, a peculiarity of the Italian STT is that it only concerns stocks of corporations with a market capitalization above 500 million euros. We exploit this feature via a differences-in-differences approach (comparing taxed and non-taxed stocks both before and after the introduction of the new tax). We ?find that the new tax widened the bid-ask spread and increased volatility, while it left transaction volumes and returns substantially unaffected. Results are broadly similar using a regression discontinuity design, in which we confront the performance of stocks just above the threshold with those just below. JEL Classification: G14, G18, H24

Keywords: market liquidity; market volatility; securities transaction tax (search for similar items in EconPapers)
Date: 2016-08
New Economics Papers: this item is included in nep-fmk and nep-mst
Note: 2772546
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Journal Article: The stock market effects of a securities transaction tax: Quasi-experimental evidence from Italy (2017) Downloads
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