The effects of a financial transaction tax in an artificial financial market
Authored by Daniel Fricke, Thomas Lux
Date Published: 2015
DOI: 10.1007/s11403-013-0116-y
Sponsors:
No sponsors listed
Platforms:
No platforms listed
Model Documentation:
Other Narrative
Mathematical description
Model Code URLs:
Model code not found
Abstract
We investigate the effects of a Financial Transaction Tax (FTT) in an
order-driven artificial financial market. FTTs are meant to limit
short-term speculative behavior by reducing the amount of excess
liquidity in the system. To quantify these effects, adjustments in
trading strategies and their effects on liquidity need to be taken into
account. We model an agent-based continuous double-auction, allowing for
a continuum of investment strategies within the chartist/fundamentalist
framework. For certain parameter combinations, our model is able to
reproduce certain stylized facts of financial time-series. We find
largely positive effects of the FTT for small tax rates. Additionally, for large tax rates we find the effects not to be as negative as
previously found.
Tags
models
Tobin tax
Impact
Stock-market
Traders
Limit order book
Foreign-exchange
Regulatory
policies
Price volatility
Paris bourse