Do News Improve Liquidity Through Improved Information or Visibility? Evidence from Emerging Markets

18 Pages Posted: 10 Feb 2016

See all articles by Diego Agudelo

Diego Agudelo

Universidad EAFIT; Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF)

Lina Cortes

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF)

Mateo Vasco

EAFIT University; Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF)

Date Written: June 10, 2013

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

JEL Classification: G10, G15, G19

Suggested Citation

Agudelo, Diego and Cortes, Lina and Vasco, Mateo, Do News Improve Liquidity Through Improved Information or Visibility? Evidence from Emerging Markets (June 10, 2013). Center for Research in Economics and Finance (CIEF), Working Papers, No. 13-37. Available at SSRN: https://ssrn.com/abstract=2729574 or http://dx.doi.org/10.2139/ssrn.2729574

Diego Agudelo (Contact Author)

Universidad EAFIT ( email )

Carrera 49 N° 7 sur – 50
Bogotá, Antioquia 00000
Colombia

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF) ( email )

Carrera 49 No. 7 South - 50
Bogotá
Colombia

Lina Cortes

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF) ( email )

Carrera 49 No. 7 South - 50
Bogotá
Colombia

Mateo Vasco

EAFIT University ( email )

Carrera 49 N° 7 sur – 50
Bogotá, Antioquia 00000
Colombia
+574 2619500 (Phone)

HOME PAGE: http://www.eafit.edu.co

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF) ( email )

Carrera 49 No. 7 South - 50
Bogotá
Colombia

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