Advertising Arbitrage

Sergey Kovbasyuk and Marco Pagano

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

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 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 (search for similar items in EconPapers)
JEL-codes: D84 G11 G14 G2 (search for similar items in EconPapers)
Date: 2014-04-29, Revised 2022-04-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.csef.it/WP/wp360.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)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:360

Access Statistics for this paper

More papers in CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Maria Carannante ().