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Financial Transaction Taxes and Expert Advice

Michele Dell’Era ()
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Michele Dell’Era: National Bank of Slovakia

Authors registered in the RePEc Author Service: Michele Dell'Era ()

No WP 4/2018, Working and Discussion Papers from Research Department, National Bank of Slovakia

Abstract: This paper models trading on expert advice to study the impact of a financial transaction tax on traders’ information and decisions. The tax worsens expert advice by strengthening experts’ incentives to misreport information. This result advances the debate on tax suitability beyond the conventional arguments and provides a new explanation for the observed decline in informational efficiency after the tax introduction: the tax makes traders less informed. The model also generates testable predictions regarding the tax impact on mean and variance of trading volume. Finally, it sheds light on the relationship between the tax and regulation of expert compensation.

Keywords: Financial Transaction Taxes; Expert Advice; Trading (search for similar items in EconPapers)
JEL-codes: D83 G12 G14 G18 (search for similar items in EconPapers)
Date: 2018-10
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