TRANSACTION TAXES AND THE BEHAVIOR OF THE SWEDISH STOCK-MARKET

This paper studies the effects of transaction taxes on the behavior of Swedish equity returns during the 1980-1987 period. Sweden provides an excellent laboratory-style setting for such a study, as taxes were imposed for political purposes rather than to alter the behavior of the stock market. Volatility did not decline in response to the introduction of taxes although stock price levels and turnover did. Large proportions of trading activity migrated overseas to London when the tax rate was increased to 2% in 1986.