scholarly journals The Impact of the French Securities Transaction Tax on Market Liquidity and Volatility

2013 ◽  
Author(s):  
Gunther Capelle-Blancard ◽  
Olena Havrylchyk
Keyword(s):  
Market Liquidity ◽  
Securities Transaction Tax ◽  
Transaction Tax ◽  
The Impact

Impact of ETF Listing on the Returns Generated by Underlying Stocks: Indian Evidence

2021 ◽  
pp. 0258042X2199101
Author(s):  
Prabhdeep Kaur ◽  
Jaspal Singh
Keyword(s):  
Event Study ◽  
Abnormal Returns ◽  
Price Impact ◽  
Exchange Traded Funds ◽  
Study Analysis ◽  
Jel Codes ◽  
Securities Transaction Tax ◽  
Underlying Stocks ◽  
Transaction Tax ◽  
The Impact

The advent of exchange traded funds (ETFs) has rendered index trading much affordable compared to their futures counterparts. The present study attempts to examine the impact of ETF listing on the price of the constituent securities of the index that it aims to track. The sample comprises of all the equity ETFs listed in India from 1 January 2002 to 31 March 2019. Event study analysis has been used to examine whether listing of ETFs bore any price impact on the constituent stocks of ETFs. To account for robustness, both parametric and non-parametric tests have been employed. The estimates obtained from event study analysis revealed that the constituent stocks generated insignificant returns for the period extending from January 2002 to March 2009 and April 2009 to March 2013 but positive and significant cumulative average abnormal returns (CAARs) post ETF listing for the period ranging from April 2013 to March 2019, thus providing evidence in support of positive price impact. The permission granted to pension funds, insurers and Employees’ Provident Fund Organisation (EPFO) to invest their funds in ETFs as well as reduction in Securities Transaction Tax (STT) account for the observed price differential. An analysis of the factors accounting for the variation in valuation effects ascertained that the stocks that were traded thinly prior to ETF listing and those forming part of ETFs with larger asset base experienced positive price impact following ETF listing. JEL Codes: G11, G14

Do Tobin taxes help stop stock price bubbles?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lucy F. Ackert ◽  
Li Qi ◽  
Wenbo Zou
Keyword(s):  
Stock Price ◽  
Trading Volume ◽  
Asset Markets ◽  
Content Type ◽  
Price Bubbles ◽  
Naturally Occurring ◽  
Securities Transaction Tax ◽  
Experimental Asset Markets ◽  
Transaction Tax ◽  
The Impact

Purpose This study aims to report on experimental asset markets designed to examine the impact of a levy on trade, as well as the taxation authority’s ability to raise tax revenue when markets are subject to mispricing. Some have suggested that a transaction tax will discourage irrational speculation and lead to more efficient markets, but others argue that a higher cost of trading will prove to be an impediment to trade with no useful outcomes. Design/methodology/approach The authors’ goal is to provide insight on the impact of a transaction tax in a very specific asset market. The authors chose this design because the robustness of the bubble and crash pattern points to an environment that is particularly appropriate for the study of the effectiveness of a transaction tax in promoting efficient pricing. Furthermore, in a laboratory, the authors can control for extraneous factors that are problematic in the study of naturally occurring environments. Findings The authors examine whether a securities transaction tax promotes efficiency in markets that are prone to mispricing and find little evidence that a tax on trade will reduce speculation. Research limitations/implications This study’s experimental environment is, of course, an abstraction of naturally occurring markets and it may be that the model excludes important aspects. Social implications The authors find that a tax on financial transactions allows the taxation authority to raise significant revenue with little impact on pricing or trading volume. Originality/value To the best of the authors’ knowledge, this study is the first systematic examination of a transaction tax on outcomes in a market that is prone to mispricing.

scholarly journals Impact of Commodity Transaction Tax on Market Liquidity, Volatility, and Government Revenues: An Empirical Study for India

2019 ◽  
Vol 44 (1) ◽  
pp. 12-29 ◽  
Author(s):  
Sanjay Sehgal ◽  
Tarunika Jain Agrawal
Keyword(s):  
Trading Volume ◽  
Market Liquidity ◽  
Commodity Futures ◽  
Tax Revenue ◽  
Agricultural Commodity ◽  
Futures Trading ◽  
Executive Summary ◽  
The Government ◽  
Transaction Tax ◽  
The Impact

Executive Summary A commodity transaction tax (CTT) of 0.01 per cent is levied on non-agricultural commodity futures trading since 1 July 2013 by the Government of India. This article examines the impact of CTT on market liquidity, volatility and government tax revenues for the Indian commodities market. We use daily data of five sample commodities, namely gold, aluminium, copper, zinc and crude oil available from 1 May 2010 to 31 August 2016. It is found that CTT imposition has destroyed the parity of the Indian commodity futures market with the international markets as CTT is absent on COMEX, LME, NYMEX, and so on. Moreover, evidence of trade migration can be found by drawing a comparison across MCX and international exchanges. This argument is further substantiated by observing the decline in liquidity after the imposition of CTT. It should be further noted that parity with the equity market is also lost as the transaction taxes imposed in equity and commodity markets are not in line with the level of volatilities of the two markets. CTT has also failed to curb speculative pressure as average volatility on major commodities has risen significantly by about 33 per cent post its imposition. Considering the transaction tax, income tax and service tax aspects and decline in the trading volume attributed solely to the CTT imposition, it is found that CTT results in huge revenue loss to the exchequer. It is estimated that at the current CTT rate, government is losing an annual net tax revenue worth ₹30 billion. Even at a lower rate of 0.001 per cent (which is one-tenth of the current rate of 0.01%), the government’s fiscal loss is expected to be about ₹2.50 billion. Even if we make a conservative assumption that CTT accounts for only 25 per cent decline in the trading volumes, the optimal CTT rate, in terms of tax revenue collections, is found at 0.003 per cent, well below the current rate. There is, therefore, no justification for retaining CTT on the commodity futures trading in India as it leads to a huge revenue loss to the government, owing to reduced trading activity and trade migration. Withdrawal of CTT would be ideal for Indian commodities market development, improving its liquidity and making it more internationally competitive.

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