We analyze a stylized market where N boundedly rational agents may decide to trade or not a share of a risky asset at subsequent trading dates. Agents' payoff depends on returns, which are endogenously determined taking into account observed and forecasted demand and an exogenous transaction tax. We study the time evolutions of demand, returns and market activity. We show that the introduction of a transaction tax generally helps in reducing variability of returns and market activity. On the other hand, there are market conditions under which a low taxation may lead the market into a very unstable phase characterized by the fluctuation of the fundamentals around two different regimes; indeed, under these circumstances, heteroscedasticity of time series is detected and statistically analyzed. (C) 2016 Elsevier B.V. All rights reserved.

Are transaction taxes a cause of financial instability?

SARTORI, ELENA;TOLOTTI, Marco
2016

Abstract

We analyze a stylized market where N boundedly rational agents may decide to trade or not a share of a risky asset at subsequent trading dates. Agents' payoff depends on returns, which are endogenously determined taking into account observed and forecasted demand and an exogenous transaction tax. We study the time evolutions of demand, returns and market activity. We show that the introduction of a transaction tax generally helps in reducing variability of returns and market activity. On the other hand, there are market conditions under which a low taxation may lead the market into a very unstable phase characterized by the fluctuation of the fundamentals around two different regimes; indeed, under these circumstances, heteroscedasticity of time series is detected and statistically analyzed. (C) 2016 Elsevier B.V. All rights reserved.
File in questo prodotto:
File Dimensione Formato  
[26]TransactionTaxes_PHYSYCAA_2016.pdf

non disponibili

Tipologia: Versione dell'editore
Licenza: Accesso chiuso-personale
Dimensione 582.95 kB
Formato Adobe PDF
582.95 kB Adobe PDF   Visualizza/Apri

I documenti in ARCA sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10278/3665141
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 2
  • ???jsp.display-item.citation.isi??? 1
social impact