The effects of the stock transaction tax on the stock market - Experiences from Asian markets
Journal
Pacific Basin Finance Journal
Journal Volume
6
Journal Issue
3-4
Pages
347
Date Issued
1998-01-01
Author(s)
Abstract
This paper examines the economic effect of the stock transaction tax, using 14 tax changes that occurred in Hong Kong, Japan, Korea, and Taiwan during the period 1975-1994. On average, an increase in tax rate reduces the stock price but has no significant effect on market volatility and market turnover. To separate noise trading from other components, I also examine the changes in idiosyncratic volatility and idiosyncratic turnover for size portfolios. For the small firm portfolio, the idiosyncratic volatility is significantly lower during the high-tax period, but not turnover. Overall, the evidence is not consistent with the hypothesis that stock transaction tax can reduce noise trading and volatility. © 1998 Elsevier Science B.V. All rights reserved.
Subjects
Asian markets | Stock market | Stock transaction tax
Type
journal article