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How does information disclosure affect liquidity? Evidence from an emerging market

Ignacio Arango and Diego A. Agudelo

The North American Journal of Economics and Finance, 2019, vol. 50, issue C

Abstract: Cross-sectional models positively relate firm information disclosure with stock liquidity, but dynamic models on days of news releases show the opposite relation. We investigate this relationship by studying the effects of information disclosure on liquidity and its determinants. We use trade and quote data from Colombia for 2015 and 2016, along with a complete database of news releases as reported by firms to the regulator. The results of panel data and panel vector autoregressive (PVAR) models suggest that news releases increase both informed and uninformed trading. Overall, the negative effect of news releases on liquidity is temporary and fully explained by increasing asymmetric information.

Keywords: Asymmetric information; Emerging markets; Informed trading; Liquidity; News releases (search for similar items in EconPapers)
JEL-codes: G10 G15 G19 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:50:y:2019:i:c:s1062940818306259

DOI: 10.1016/j.najef.2019.100997

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