________ Occurs When Market Participants Observe Returns on a Security

question 95

Multiple Choice

________ occurs when market participants observe returns on a security that are larger than what is justified by the characteristics of that security and take action to quickly eliminate the unexploited profit opportunity.

• A)Arbitrage
• B)Mediation
• C)Asset capitalization
• D)Market intercession

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Definitions:

Compensating Differentials

Wage differences across jobs that reflect the desirability of the job attributes, compensating workers for job inconveniences or hazards.

Distributional Justice

The ethical principle concerned with the fair allocation of goods, wealth, or resources among individuals in a society.

John Rawls

An American philosopher known for his theory of justice and contributions to political and moral philosophy.

Income Redistribution

The reallocation of income from certain individuals to others by means of a social mechanism such as taxation, charity, welfare, public services, land reforms, or monetary policies.