China Stamp Duty On Securities Transactions, The Market Effects

The efficiency of a capital market could be evaluated by the proportion that transactional cost weighs in the market value.In most cases,stamp duty rate of securities transactions will pose impact on securities market in terms of trading volume,trading price,market volatility,noise transactions as well as resource allocation.In this paper,we mainly focus on Chinese securities market and aim to find out how the adjustments of stamp duty rate will impact the local stock market.In specific,this paper has made analysis on four major events of the rate adjustment by using the method of event study and equal variance test to verify whether the impacts on trading volume,market return and market volatility are significant or not.The findings of the paper include:1.The adjustment of the stamp duty rate of securities transaction will pose further impacts on trading volume and market volatility rather than on market return, among which the trading volume effect matches with expectations,whereas the changes in market volatility is inconsistent with what we expected.It is more significant in the case that the stamp duty rate is raised.2.Asymmetrical market effects have occurred when the adjustment is designated with different directions.In general way,raising the rate,rather than cutting the rate, will bring about stronger influence on stock market.3.Stock market will encounter shocks in short term with the adjustment of stamp duty rate of securities transaction.But in the long term,we can not find evidence to support that the market effects are caused by the rate adjustment or any other significant changes in stock market.At the last part of the paper,we have listed following suggestions:1.Set up the securities trading tax to substitute the current kind of stamp duty tax.2.The main obligation of securities trading tax should be imposed on the sell side of each transaction.3.Appropriately expand the basis of related tax duty.4.Be more focal on the finance function of stamp duty rate of securities tradings.