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

Author

Listed:
  • Diego A. Agudelo
  • Lina M. Cortes
  • Mateo Vasco
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.

Suggested Citation

  • Diego A. Agudelo & Lina M. Cortes & Mateo Vasco, 2015. "Do news improve liquidity through improved information or visibility? Evidence from Emerging Markets," Documentos de Trabajo de Valor Público 14253, Universidad EAFIT.
    • Handle: RePEc:col:000122:014253
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    File URL: http://hdl.handle.net/10784/7974
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    More about this item

    Keywords

    Informed trading; liquidity; news; emerging markets; market microstructure.;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G19 - Financial Economics - - General Financial Markets - - - Other

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