The impact of financial transaction taxes on stock markets: Short-run effects, long-run effects, and reallocation of trading activity

Arbeitspapier

We investigate the impact of the French 2012 financial transaction tax on trading activity, volatility, and price efficiency measured by first-order autocorrelation. We extend empirical research by analysing anticipation and reallocation effects. In addition, we consider measures for long-run volatility and first-order autocorrelation that have not been explored yet. We find robust evidence for anticipation effects before the effective date of the French FTT. Controlling for short-run effects, we only find weak evidence for a long-run reduction of trading activity due to the French FTT. Thus, the main impact of the French FTT on trading activity is short-run. We find stronger reactions of low-liquidity treated stocks and a reallocation of trading activity to high-liquidity stocks participating in the Supplemental Liquidity Provider Programme, which is both in line with liquidity clientele effects. Finally, we find weak evidence for a persistent volatility reduction but no indication for a significant FTT impact on price efficiency measured by first-order autocorrelation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IWH Discussion Papers ; No. 12/2022

Classification and Topics

• Classification: Wirtschaft ; Asset Pricing; Trading Volume; Bond Interest Rates ; Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
• Subject: anticipation effect ; financial transaction tax ; long-run treatment effect ; market quality ; short-run treatment effect

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Eichfelder, Sebastian ; Noack, Mona ; Noth, Felix
• Event: Veröffentlichung
• (who): Halle Institute for Economic Research (IWH)
• (where): Halle (Saale)
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/251589
• URN: urn:nbn:de:gbv:3:2-869166
• Last update: 10.03.2025, 11:43 AM CET