If a Security's Market Price Were to Deviate from the Level

question 34

True/False

If a security's market price were to deviate from the level justified by the APT factors and the security's price sensitivity to them, investors would engage in arbitrage and drive the market price to an appropriate level.

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Definitions:

Economic Model

A theoretical construct that represents economic processes by a set of variables and a set of logical or quantitative relationships between them.

Economic Conditions

The state of various factors that influence an economy at a given time, including inflation rates, unemployment levels, and the rate of economic growth.

Ceteris Paribus

A Latin phrase meaning "all other things being equal," used in economics to analyze the effect of one variable on another, holding all other relevant factors constant.

Economic Model

A simplified representation of economic processes, used to analyze and make predictions about economic behavior.