Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/129592 
Year of Publication: 
2015
Series/Report no.: 
Working Paper Series No. 15-10
Publisher: 
University of Mannheim, Department of Economics, Mannheim
Abstract: 
We present a stock market model that quantitatively replicates the joint behavior of stock prices, trading volume and investor expectations. Stock prices in the model occasionally display belief-driven boom and bust cycles that delink asset prices from fundamentals and redistribute considerable amounts of wealth from less to more experienced investors. Although gains from trade arise only from subjective belief di¤erences, introducing financial transactions taxes (FTTs)remains undesirable. While FTTs reduce the size and length of boom-bust cycles, they increase the likelihood of such cycles, therby overall return volatility and wealth redistribution. Contingent FTTs, which are levied only above a certain price threshold, give rise to problems of equilibrium multiplicity and non-existence.
Subjects: 
financial transactions tax
Tobin tax
asset price booms
JEL: 
G12
D84
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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