The impact of a financial transaction tax on stylized facts of price returns-Evidence from the lab

  • Huber J
  • Kleinlercher D
  • Kirchler M
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Abstract

As the introduction of financial transaction taxes is increasingly discussed by political leaders we explore possible consequences such taxes could have on markets. Here we examine how "stylized facts", namely fat tails and volatility clustering, are affected by different tax regimes in laboratory experiments. We find that leptokurtosis of price returns is highest and clustered volatility is weakest in unilaterally taxed markets (where tax havens exist). Instead, tails are slimmest and volatility clustering is strongest in tax havens. When an encompassing financial transaction tax is levied, stylized facts hardly change compared to a scenario with no tax on all markets. © 2012 Elsevier B.V..

Author-supplied keywords

  • Experiment
  • Fat tails
  • Financial transaction tax
  • Stylized facts
  • Volatility clustering

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