Do news improve liquidity through improved information or visibility? Evidence from Emerging Markets

Diego Agudelo (dagudelo@eafit.edu.co), Lina Cortés and Mateo Vasco (mvascoco@eafit.edu.co)

No 14253, Documentos de Trabajo de Valor Público from Universidad EAFIT

Abstract: Abstract: Market microstructure models imply that informed trading reduces liquidity. We test for the effect of the frequency of new releases, as a proxy of information arrival, on liquidity in the Chilean stock market. We find that news release frequency is strongly related to improved liquidity. Those results appear for both negative a positive news days and are robust using four different measures of liquidity: bid-ask spread, Amihud measure and two versions of the Zero trading variable. We also find evidence consistent with visibility and information arrival interacting for enhancing liquidity.

Keywords: Informed trading; liquidity; news; emerging markets; market microstructure. (search for similar items in EconPapers)
JEL-codes: G10 G15 G19 (search for similar items in EconPapers)
Pages: 15
Date: 2015-03-01
New Economics Papers: this item is included in nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:col:000122:014253

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