Advertising Arbitrage

Sergey Kovbasyuk and Marco Pagano

No w0287, Working Papers from New Economic School (NES)

Abstract: An arbitrageur with short investment horizon gains fr om accelerating price discovery by advertising his private information. However, advertising many assets may overload investors' attention, reducing the number of informed traders per asset and slowing price discovery. So the arbitrageur optimally concentrates advertising on just a few assets, unless his trades have significant price impact. The arbitrageur's gain from advertising is increasing in the assets' mispricing and in the precision of his private information, and is decreasing in its complexity. If several arbitrageurs have private information, inefficient equilibria can arise, where substantial mispricing persists or investors' attention is overloaded.

Keywords: limits to arbitrage; advertising; price discovery; limited attention. JEL Classifications: G11; G14; G2; D84. (search for similar items in EconPapers)
Pages: 48 pages
Date: 2022-02
New Economics Papers: this item is included in nep-cwa, nep-mic and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.nes.ru/files/Preprints-resh/WP287.pdf (application/pdf)

Related works:
Journal Article: Advertising Arbitrage (2022)
Working Paper: Advertising Arbitrage (2022)
Working Paper: Advertising Arbitrage (2022)
Working Paper: Advertising Arbitrage (2020)
Working Paper: Advertising Arbitrage (2020)
Working Paper: Advertising arbitrage (2020)
Working Paper: Advertising arbitrage (2014)
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