We aim to make two contributions to the literature on the effects of transaction costs on financial price volatility. First, by augmenting a double differencing approach with a re- search design with three ingredients (a common set of companies simultaneously listed on two stock exchanges, binding capital controls, and different timing of changes in trans- action costs), we obtain a control group that has identical corporate fundamentals as the treatment group. We apply the research design to Chinese stocks that are cross-listed in Hong Kong and Mainland China. Second, we allow transaction costs to have different ef- fects in markets with different maturity. We find a significantly negative relationship, on average, between stamp duty increase and price volatility. However, this average effect masks some important heterogeneity. In particular, when institutional investors have be- come a significant part of the traders’ pool, we find an opposite effect. Overall, our results suggest that a Tobin tax could work in an immature market, but can backfire in a more developed market.