Re: Volatility

["Harry Veeder" <veed0001@xxxxxxxxxxxxxxxx>]

----------
>From: Paul Davidson <pdavidson@xxxxxxx>
>To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
>Subject: Re: Volatility
>Date: Fri, Apr 7, 2000, 3:47 pm
>

>> > >
>> > >Harry Veeder wrote:
>> > >
>> > >>
>> > >> Why does nobody (in government) ever consider taxation as an
>> instrument of
>> > >> stock market regulation? A system of stock market taxes would be
>> effective
>> > >> if they used the speed of electronic feedback rather than relying on the
>> > >> speed of human (eg. the FED) feedback. Such taxes could deflate
>> "bubbles"
>> > >> before they "burst".
>
>As the talk returns to the use of taxes on financial transactions to reduce
>volatility (bubbles?), I wonder why no one look at the empirical evidence
>which shows that a transactions tax ALWAYS increases volatility measured as
>variance.  I cited studies done by others on this matter and then explain
>why this is NECESSARILY true in my  paper "Volatile Financial Markets
>and  The Speculator" in  the journal ECONOMIC ISSUES, September 1998.  This
>paper can be obtained from mu home page.

Bubbles don't have to be volatile until they burst. But I really don't know
how bubbles and their critical bursting point are to be measured
and calculated.

Harry Veeder