Guarino, Antonio;
Cipriani, Marco;
Uthemann, Andreas;
(2022)
Financial transaction taxes and the informational efficiency of financial markets: A structural estimation.
Journal of Financial Economics
, 146
(3)
pp. 1044-1072.
10.1016/j.jfineco.2022.04.007.
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Abstract
We develop a new methodology to estimate the impact of a financial transaction tax (FTT) on financial market outcomes. In our sequential trading model, there are price-elastic noise and informed traders. We estimate the model through maximum likelihood for a sample of 60 NYSE stocks in 2017. We quantify the effect of introducing an FTT given the parameter estimates. An FTT increases the proportion of informed trading, improves information aggregation, but lowers trading volume and welfare. For some less liquid stocks, however, an FTT blocks private information aggregation.
| Type: | Article |
|---|---|
| Title: | Financial transaction taxes and the informational efficiency of financial markets: A structural estimation |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1016/j.jfineco.2022.04.007 |
| Publisher version: | https://doi.org/10.1016/j.jfineco.2022.04.007 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Financial Transaction Tax, Market Microstructure, Structural Estimation |
| UCL classification: | UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics UCL > Provost and Vice Provost Offices > UCL SLASH UCL |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10150091 |
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