Financial transaction taxes and the informational efficiency of financial markets: a structural estimation

Marco Cipriani, Antonio Guarino and Andreas Uthemann

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We develop a new methodology to estimate the impact of a financial transaction tax (FTT) on informational efficiency, liquidity and volatility. In our sequential trading model there are price elastic noise traders and traders with private information of heterogeneous quality. We estimate the model without a tax and then quantify the elect of an FTT. In our sample, noise traders are price elastic but less so than informed traders. The introduction of an FTT changes the composition of the market, lowering informational efficiency. Even a small, 5 bps, FTT impedes correct price convergence on a sizeable percentage of days.

Keywords: financial transaction tax; market microstructure; structural estimation (search for similar items in EconPapers)
JEL-codes: C13 D82 G14 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2019-03-01
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://eprints.lse.ac.uk/118905/ Open access version. (application/pdf)

Related works:
Journal Article: Financial transaction taxes and the informational efficiency of financial markets: A structural estimation (2022)
Working Paper: Financial Transaction Taxes and the Informational Efficiency of Financial Markets: A Structural Estimation (2022)
Working Paper: Financial transaction taxes and the informational efficiency of financial markets: a structural estimation (2022)
Working Paper: Financial Transaction Taxes and the Informational Efficiency of Financial Markets: A Structural Estimation (2021)
Working Paper: Financial transaction taxes and the informational efficiency of financial markets: a structural estimation (2019)
Working Paper: Financial Transaction Taxes anf the Informational Efficiency of Financial Markets: A Structural Estimation (2015)
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:ehl:lserod:118905

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().