Sand in the wheels or wheels in the sand? Tobin taxes and market crashes

0463780 - NHÚ 2017 RIV NL eng J - Článek v odborném periodiku
Lavička, H. - Lichard, Tomáš - Novotný, Jan
Sand in the wheels or wheels in the sand? Tobin taxes and market crashes.
International Review of Financial Analysis. Roč. 47, October (2016), s. 328-342. ISSN 1057-5219. E-ISSN 1873-8079
Grant CEP: GA ČR(CZ) GA14-27047S
Institucionální podpora: RVO:67985998
Klíčová slova: price jumps * financial transaction taxes * agent-based modeling
Kód oboru RIV: AH - Ekonomie
Impakt faktor: 1.457, rok: 2016

The recent economic crisis revived interest in financial transaction taxes (FTTs) as a means to offset negative risk externalities. However, up-to-date academic research does not provide sufficient insights into the effects of transaction taxes on financial markets as the literature has here-to-fore been focused too narrowly on Gaussian variance as a measure of volatility. In this paper, we argue that it is imperative to understand the relationship between price jumps, Gaussian variance, and FTTs. While Gaussian variance is not necessarily a problem in itself, the non-normality of return distribution caused by price jumps affects not only the performance of many risk-hedging algorithms but directly influences the frequency of catastrophic market events. To study the aforementioned relationship, we use an agent-based model of financial markets. Its results show that the relationship between FTTs and price jumps is intricate. This result implies that regulators may face a trade-off between overall variance and price jumps when designing optimal tax.
Trvalý link: http://hdl.handle.net/11104/0262864