Financial transaction taxes and the informational efficiency of financial markets: A structural estimation
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 effect 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.
Year of publication: |
2019
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Authors: | Cipriani, Marco ; Guarino, Antonio ; Uthemann, Andreas |
Publisher: |
London : Centre for Microdata Methods and Practice (cemmap) |
Subject: | Financial Transaction Tax | Market Microstructure | Structural Estimation |
Saved in:
freely available
Series: | cemmap working paper ; CWP07/19 |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 10.1920/wp.cem.2019.0719 [DOI] 1048999475 [GVK] hdl:10419/211100 [Handle] RePEc:ifs:cemmap:07/19 [RePEc] |
Classification: | G14 - Information and Market Efficiency; Event Studies ; D82 - Asymmetric and Private Information ; C13 - Estimation |
Source: |
Persistent link: https://www.econbiz.de/10012146359