Evolution of security transaction tax in India
Pankaj Sinha () and
MPRA Paper from University Library of Munich, Germany
Securities Transaction Taxes have received much attention over the last few years with countries and global organizations trying to control the level of speculations, especially since the Global Financial Crisis. This study examines the impact of an increase in the level of securities transaction tax on traded quantity of shares and time series behaviour of stock returns using data from two prominent national stock exchanges of India. We find that when the tax on equity transactions increases from 0.1% to 0.125%, the quantity of traded shares (volume) decreases by more than twenty five percent. Since the volatility of returns on stocks is not constant through time, conditional heteroscedasticity models are used to estimate the volatility of stock returns. The impact of tax on volatility of return on indices is insignificant.
Keywords: securities transaction taxes; stock market; returns; traded shares (search for similar items in EconPapers)
JEL-codes: G14 G12 G18 G10 (search for similar items in EconPapers)
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