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Sand in the wheels or wheels in the sand? Tobin taxes and market crashes
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SYSNO ASEP 0468765 Document Type J - Journal Article R&D Document Type Journal Article Subsidiary J Článek ve WOS Title Sand in the wheels or wheels in the sand? Tobin taxes and market crashes Author(s) Lavička, H. (CZ)
Lichard, Tomáš (NHU-C) RID
Novotný, Jan (NHU-C) RIDSource Title International Review of Financial Analysis. - : Elsevier - ISSN 1057-5219
Roč. 47, October (2016), s. 328-342Number of pages 15 s. Language eng - English Country NL - Netherlands Keywords price jumps ; financial transaction taxes ; agent-based modeling Subject RIV AH - Economics Institutional support NHU-C - PRVOUK-P23 UT WOS 000386056900030 EID SCOPUS 84962739625 DOI https://doi.org/10.1016/j.irfa.2016.03.012 Annotation 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. Workplace NHU-C Contact Tomáš Pavela, pavela@cerge-ei.cz, Tel.: 224 005 122 Year of Publishing 2017
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