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market mispricing creates arbitrage opportunities, is this true and how. the actions of arbitrageurs contributes towards the removal of mispricing, is this true and how.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter6: Risk And Return

Section6.10: Behavioral Finance

Problem 2ST

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the actions of arbitrageurs contributes towards the removal of mispricing, is this true and how.

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It is said that market mispricing creates arbitrage opportunities. The other side of the coin is that the actions of arbitrageurs contribute to the removal of mispricing. How do you reconcile these seemingly contrary arguments?
Which of the following statements is NOT an explanation of Efficient Market Hypothesis violations? Failure to take account of transactions costs. Failure to deal properly with risk. Weak theoretical foundation. Inaccurate trading data.
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