Advertising Arbitrage

Sergey Kovbasyuk and Marco Pagano

No 1401, EIEF Working Papers Series from Einaudi Institute for Economics and Finance (EIEF)

Abstract: An arbitrageur with short investment horizon gains from 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 difficulty for investors. If several arbitrageurs have private information, inefficient equilibria can arise, where investors' attention is overloaded and substantial mispricing persists.

Pages: 47 pages
Date: 2014, Revised 2022-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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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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