The More Efficient the Foreign Exchange Market Is, the More

question 25

True/False

The more efficient the foreign exchange market is, the more likely it is that exchange rate movements are random walks.

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Definitions:

House Money

A term from Behavioral Finance referring to the tendency of individuals to take greater risks when trading with profits from prior trades, viewing it as "play money."

Arbitrage Reaction

The immediate activity performed by arbitrageurs to exploit price differences between markets or securities for profit.

Risks

The probability or threat of damage, injury, liability, loss, or any other negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through preemptive action.

Arbitrage

Arbitrage is the simultaneous purchase and sale of the same asset in different markets to profit from unequal prices.