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Advertising Arbitrage

Author

Listed:
  • Sergey Kovbasyuk

    (New Economic School)

  • Marco Pagano

    (University of Naples Federico II, CSEF and EIEF)

Abstract

Arbitrageurs with a short investment horizon gain from accelerating price discovery by advertising their private information. However, advertising many assets may overload investors' attention, reducing the number of informed traders per asset and slowing price discovery. So arbitrageurs optimally concentrate advertising on just a few assets, which they overweight in their portfolios. Unlike classic insiders, advertisers prefer assets with the least noise trading. If several arbitrageurs share information about the same assets, inecient equilibria can arise, where investors' attention is overloaded and substantial mispricing persists. When they do not share, the overloading of investors' attention is maximal.

Suggested Citation

  • Sergey Kovbasyuk & Marco Pagano, 2020. "Advertising Arbitrage," Working Papers w0277, New Economic School (NES).
    • Handle: RePEc:abo:neswpt:w0277
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    File URL: https://www.nes.ru/files/Preprints-resh/WP277.pdf
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    References listed on IDEAS

    as
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    Cited by:

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    More about this item

    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G2 - Financial Economics - - Financial Institutions and Services
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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