Stamp Duty On Stock Market Run Performance

It has been over ten years since the stock exchange stamp tax was first brought into China. In these ten years, the tax rate has been fluctuated many times and it is very obviously that these adjustments of tax rate have worked out on the stock market to some extent. The rise of the stamp tax rate may control the overheated market, and the fall may cheer up the market.As the development of the stock market in our country, more and more emphasis has been put on the effectively of the policy of financial supervision. Concerning the performance of the market, the adjustments of stamp tax rate affect the whole mechanism in a multiple way. A review of the literatures about stamp tax rate home and abroad shows that most researches focus on the impact given to the fluctuation of stock price by the adjustment of stamp tax rate, but few on the relations between stamp rate and the market operational performance.The experiences of stock market in various countries show that it is an effective way for the supervisors of a state to regulate the stock market, to adjust the exchange cost of the stock market at right times. But in our country, a unified knowledge about the relations between stamp tax rate and market operational performance hasn't been reached, while in the practice the stamp tax policy has taken on too much responsibilities of market regulation. Therefore, both theoretical and empirical study focus on the relations between stamp tax rate and market operational performance are needed.These kind of research can help to find out the inner mechanisms of how the stock price forms, hence provide a theoretical basis for policies promoting rational investments, protecting the investor' interests and improving the stock market. In a word, the research of relations between stamp tax rate and the market operational performance is very important for scholars to deepen the knowledge of stock market in our country, which could provide more instructions of the sound development of the stock market.This paper focuses on the questions below: Firstly, which indicates of the market operational performance does stamp tax affect? Secondly, concerning the present mechanism of stamp tax, will there be a rate that makes the best market operational performance? Thirdly, will there be the best way of collecting? Fourthly, what is the relation between the stamp tax rate in our country and the volatility? Lastly, what's the relation between stamp tax rate and the liquidity? Findings of this paper provide conclusions below:Firstly, stamp tax is a significant representation of the low cost indicates, and has very strong correlation with the liquidity indicates and the stability indicates, with a weak correlation with the effectively indicate, transparency indicate and safe indicate. Therefore, this paper mainly focuses on the effect on liquidity and volatility.Secondly, the stamp tax rate has been fluctuated from 0.1% to 0.6%.When the rate is 0.1%, the market operational performance is best, with the highest liquidity and the lowest volatility; when the rate is between 0.3% and 0.4%; the operational performance is the worst, with the lowest liquidity and the highest volatility. Presently, the stamp tax rate in our country is collected at 0.3%.It is the worst judging from the performance.Thirdly, different ways of collecting taxes has different impact on the market operational performance. Theoretically, the fall of volatility demands taxes from sellers, while the rise of liquidity demands taxes from buyers. But according to the results of the numerical simulation, stamp taxes from sellers only can bring down the volatility but doesn't affect the liquidity. So, stamp taxes from sellers only can improve the market operational performance.Fourthly, stamp tax has unsymmetrical correlation with volatility, which involves the unsymmetrical impact on volatility by different rates, and the adjustments of the rates. The correlation is not linear. When the stamp tax rate locates in the middle, the volatility of the stock price is the highest. Meanwhile, the adjustments of the stamp tax rate will raise the volatility in a short time. And the rise of the rate has a more significant impact than the fall.Lastly, stamp tax rate has a significant minus impact on the liquidity. The rises of the rate bring down the liquidity in the market. The impact is unsymmetrical: the change of liquidity caused by the rate rise exceeds much that caused by the fall, and the impact on liquidity of rate rise is more rapid.The results of this paper provide suggestions of the relation between stamp tax rates and the stock market to the supervisors, also some possible ways of the researches in the future.