Su, Yongyang (2010): The impact of the securities transaction taxes on the Chinese stock market.
Download (154Kb) | Preview
This paper analyzes the impact of changes in the securities transaction tax (STT) rate on the local A-shares market in China. We find that, on average, a 22-base-point- increase in the STT rate is associated with about a 28% drop in trading volume, while a 17-base-point- reduction in the STT rate is associated with about a 89% increase in trading volume in the Chinese A-shares market. Both the increases and reductions in the STT rate result in a significant increase in the market return volatility. Besides, the increases in the STT rate have mixed effects on market efficiency, either improving or curbing it. The reductions usually either make the market less efficient or have not effect on it. The empirical results together show that levying the STT on trading is not an effective tool to regulate stock market, at least in this emerging market.
|Item Type:||MPRA Paper|
|Original Title:||The impact of the securities transaction taxes on the Chinese stock market|
|English Title:||The impact of the securities transaction taxes on the Chinese stock market|
|Keywords:||Securities transaction taxes, stock market,volatility, trading volume|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G10 - General|
|Depositing User:||Yongyang Su|
|Date Deposited:||14. May 2010 00:19|
|Last Modified:||13. Feb 2013 13:52|
Amihud, Y., Mendelson, H., 1992, "Transaction Taxes and Stock values," Modernizing U.S. Securities regulation: Economic and Legal Perspectives. Irwin, 477-500.
Bailey, W., 1994, "Risk and Return on China's New Stock Markets: Some Preliminary Evidence," Pacific-Basin Finance Journal, 2, 243-260.
Bailey, W., Chung, P., and Kang, J. K., 1999, " Foreign Ownership Restrictions and Equity Price Premiums: What Drives the Demand for Cross-Border Investments?" Journal of Financial and Quantitative Analysis, 34, 489-511.
Baltagi, H. B. and Li, D. and Li, Q., 2006, "Transaction Tax and Stock Market Behavior: Evidence from an Emerging Market," Empirical Economics, 31, 393-408.
Bollerslev, T., 1986, "Generalized Autoregressive Conditional Heteroscedasticity," Journal of Econometrics, 31, 307--327.
Brown, M.B. and Forsythe, A.B., 1974, "Robust Tests for the Equality of Variances," Journal of the American Statistical Association, 69, 364-367.
Campbell, J. Y. and Froot, K. A., 1995, "Securities Transaction Taxes: What about International Experiences and Migrating Markets, in Securities Transaction Taxes: False Hopes and Unintended Consequences," Irwin Professional Publishing, Burr, IL, 110-142.
Chan, K. and Menkveld, J. A. and Yang, Z., 2008, "Information Asymmetry and Asset Prices: Evidence from the China Foreign Share Discount," Journal of Finance, 63, 159-196.
Chou, R. and Wang, G., 2006, "Transaction Tax and Market Quality of the Taiwan stock Index Futures," Journal of Futures Markets, 26, 1195-1216.
Djolov, G. G., 2002, "An Equal Variance Test," Estudios de economia, 29, 327-39.
Domowitz, L., J.Glen, and A. Madhavan., 2000, "Liquidity, Volatility, and Equity Trading Costs Across Countries and Over Time," International Finance Corporation, DC.
Engle, R. F., 1982, "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of U.K. Inflation," Econometrica, 50, 987--1008.
Habermeier, K., A.A. Kirilenka., 2003, "Securities Transaction Tax and Financial Markets," IMF Staff Papers, 50, 165-180.
Hau, H., 2006, "The Role of Transaction Costs for Financial Volatility: Evidence from the Paris Bourse," Journal of European Economics Association, 4, 862-870.
Hu, S., 1998, "The Effects of the Stock Transaction Tax on the Stock Market: Experiences from Asian Markets," Pacific-Basin Finance Journal, 6, 347-364.
Karpo, J. M., 1987, "The Rlationship between Price Changes and Trading Volume: a Survey," Journal of Financial and. Quantitative Analysis, 22, 109-126.
Kupiec, P. H., 1996, "Noise Traders, Excess Volatility, and a Securities Transaction Tax," Journal of Financial Service Research, 10, 115-129.
Lee, SB and Ohk, KY., 1992, "Stock Index Futures Listing and Structure Change in Time-Varying Volatility," Journal of Futures Markets, 12, 493--509.
Li, D and Lin, S-K, and Li, C, 1997, The Impact of Settlement Time on the Volatility of Stock Markets," Applied Financial Economics, 7, 689--694.
Levene, H., 1960, "In Contributions to Probability and Statistics: Essays in Honor of Harold Hotelling. I. Olkin et al.," Stanford University Press, Stanford Calif., 278-292.
Lo A, MacKinlay, C., 2004, "Asset Prices and Trading Volume under Fixed Transaction Costs," Journal of Political Economic, 112, 1054-1091.
Phylaktis, K. and Aristidou, A., 2007, "Security Transaction Taxes and Financial Volatility: Athens Stock Exchange," Applied Financial Economics, 17, 1455-1467.
Pollin, R and Baker, D and Schaberg, M., 2003. "Securities Transaction Taxes for U.S. Financial Markets," Eastern Economic Journal, 29, 527-558.
Saporta, V. and Kan, K., 1997, "The Effects of Stamp Duty on the Level and Volatility of UK Equity Price," working Paper, Bank of England.
Schwert, G. W. and Seguin, P. J., 1993, "Securities Transaction Taxes: an Overview of Costs, Benefits, and Unresolved Questions," Financial Analyst Journal, 49, 27-35.
Song, M. F. and Z, J., 2005, "Securities Transaction Tax and Market Volatility," The Economics Journal, 115, 1103-1120.
Stiglitz, J. E., 1989, "Using Tax Policy to Curb Speculative Short-Term Trading," Journal of Financial Service Research, 3, 101-115.
Umlauf, S. R., 1993, "Transaction Taxes and the Behavior of the Swedish Stock Market," Journal of Financial Economics, 33, 249-282.
Xiong, W and Yan, H., 2010 "Heterogeneous Expectations and Bond Markets," Review of Financial Studies, 23, 1433-1466.
Available Versions of this Item
- The impact of the securities transaction taxes on the Chinese stock market. (deposited 14. May 2010 00:19) [Currently Displayed]