Advances in Economics and Business Vol. 2(7), pp. 249 - 260
DOI: 10.13189/aeb.2014.020701
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Impacts of Securities Transaction Tax Adjustments in Stock Market in China

Tong Fu ^*, Kennedy K. Abrokwa , Keshab R. Bhattarai
Economics Department, Business School, University of Hull. Hull, HU6 7 RX, United Kingdom

ABSTRACT

In 2007, the security transaction tax was adjusted suddenly in the stock market by the Chinese government. The impacts of these adjustments are found here by analysing the real data of daily prices and trading volumes before and after these adjustments. Results of a vector error correction model confirm that, the long and short run relationships between price and trading volume were distorted fundamentally. A seasonal ARIMA model on stock price and trading volume was employed to predict prices or volumes with and without STT adjustments to quantify the impacts of the adjustment on prices and trading volumes. The results show that, the adjustment reduces the stock price by 890.46 points and trading volume by 972 million of hundred units. Two GARCH (1,1) models used to assess the volatility changes of trading volumes indicate to the significance of price effects in reduction of volatility in the Chinese stock market.

KEYWORDS
Securities Transaction Tax Adjustment, Stock Market, VEC and SARIMA Models

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] Tong Fu , Kennedy K. Abrokwa , Keshab R. Bhattarai , "Impacts of Securities Transaction Tax Adjustments in Stock Market in China," Advances in Economics and Business, Vol. 2, No. 7, pp. 249 - 260, 2014. DOI: 10.13189/aeb.2014.020701.

(b). APA Format:
Tong Fu , Kennedy K. Abrokwa , Keshab R. Bhattarai (2014). Impacts of Securities Transaction Tax Adjustments in Stock Market in China. Advances in Economics and Business, 2(7), 249 - 260. DOI: 10.13189/aeb.2014.020701.