Financial transaction taxes, market composition, and liquidity

Peter Hoffmann and Jean-Edouard Colliard

No 2030, Working Paper Series from European Central Bank

Abstract: We use the introduction of a financial transaction tax (FTT) in France in 2012 to test competing theories on its impact. We find no support for the idea that an FTT improves market quality by affecting the composition of trading volume. Instead, our results are in line with the hypothesis that a lower trading volume reduces liquidity, and thereby market quality. Consistent with theories of asset pricing under transaction costs, we document a shift in security holdings from short-term to long-term investors. Finally, our findings show that moderate aggregate effects on market quality can mask large adjustments made by individual agents. JEL Classification: G10, G14, G18, H32

Keywords: financial transaction tax; high-frequency trading; institutional trading; liquidity (search for similar items in EconPapers)
Date: 2017-02
New Economics Papers: this item is included in nep-eec, nep-fmk and nep-mst
Note: 1137913
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp2030.en.pdf (application/pdf)

Related works:
Journal Article: Financial Transaction Taxes, Market Composition, and Liquidity (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20172030

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().