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 day 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.
