The effects of Stamp Duty on the Level and Volatility of Equity Prices

Working papers set out research in progress by our staff, with the aim of encouraging comments and debate
Published on 24 October 1997

Working paper No. 71
By Victoria Saporta and Kamhon Kan

This paper investigates the effects of stamp duty - the UK securities transaction tax - on the level and volatility of equity prices. We examine the response of the equity market to announcements of changes in stamp duty rates and we compare the prices of two assets which are similar in all respects apart from their treatment for stamp duty purposes: American Depositary Receipts (ADRs) and their London Stock Exchange-traded stocks. Our findings are consistent with the hypothesis that stamp duty is capitalised in prices. Using univariate GARCH models, we find that stamp duty has no effect on volatility, contradicting the key hypothesis put forward by proponents of transaction taxes.

PDF The effects of stamp duty on the level and volatility of UK equity prices

 


Other papers

Was this page useful?
Add your details...