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| We analyze the impact of the French 2012 financial transaction tax (FTT) on trading volumes stock prices liquidity and volatility. We extend the empirical research by identifying FTT announcement and short-run treatment effects which can distort difference-in-differences estimates. In addition we consider long-run volatility measures that better fit the French FTT’s legislative design. While we find strong evidence of a positive FTT announcement effect on trading volumes there is almost no statistically significant evidence of a long-run treatment effect. Thus evidence of a strong reduction of trading volumes resulting from the French FTT might be driven by announcement effects and short-term treatment effects. We find evidence of an increase of intraday volatilities in the announcement period and a significant reduction of weekly and monthly volatilities in the treatment period. Our findings support theoretical considerations suggesting a stabilizing impact of FTTs on financial markets. |
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