Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/222607
Authors: 
Kovbasyuk, Sergey
Pagano, Marco
Year of Publication: 
2020
Series/Report no.: 
CFS Working Paper Series No. 641
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, 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.
Subjects: 
limits to arbitrage
advertising
price discovery
limited attention
JEL: 
G11
G14
G2
D84
Document Type: 
Working Paper

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