The Impact of the Security Transaction Taxes on Stock Prices and Stock Liquidity; Evidence from the NYSE

Security Transaction taxes have been in place in many countries for many years now. Yet we do not fully know how these taxes effect prices, volumes, bid-ask spreads and volatility and in turn if they are good for the economy or not. This paper is an attempt to understand how security transaction taxes decrease volume of trading, decrease prices of stocks and increase bid-ask spreads. It analyses the effect the STTs implemented by the state and federal government in New York on June 1st 1905 and December 1st 1914 respectively, had on the stocks of the New York Stock Exchange. These results will help us analyze whether future implementations of STTs will harm or benefit the market