Portfolio Choice and Transactions Taxes

Markus Haberer

No 03/09, CoFE Discussion Papers from University of Konstanz, Center of Finance and Econometrics (CoFE)

Abstract: In a simple portfolio choice model of two assets a foreign exchange transactions tax is implemented. We show that the graph in the mu-sigma[square] range is still a parabola and delineate its characteristics for altering tax rates. We presumed a risk avers investor seeking to minimize investment risks by international diversification of two uncorrelated assets. The main finding is that setting up a portfolio under the new tax condition leads to a higher transaction volume on international financial markets. In contrast, the transactions tax has got a stabilizing character when adjusting the portfolio to increased foreign investment risks.

Keywords: International Financial Markets; Portfolio Choice; Risk Diversification; Tobin Tax; Transactions Tax (search for similar items in EconPapers)
JEL-codes: G11 G15 G18 H29 H39 O16 O23 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cofedp:0309

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