Advertising arbitrage

Arbeitspapier

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, inefficient equilibria can arise, where investors' attention is overloaded and substantial mispricing persists. When they do not share, the overloading of investors' attention is maximal.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper Series ; No. 641

Classification and Topics

• Classification: Wirtschaft ; Portfolio Choice; Investment Decisions ; Information and Market Efficiency; Event Studies; Insider Trading ; Expectations; Speculations
• Subject: limits to arbitrage ; advertising ; price discovery ; limited attention

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Kovbasyuk, Sergey ; Pagano, Marco
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/222607
• URN: urn:nbn:de:hebis:30:3-534594
• Last update: 10.03.2025, 11:43 AM CET