A Possible Limit on Arbitrage Activity That May Allow Behavioral

question 13

Multiple Choice

A possible limit on arbitrage activity that may allow behavioral biases to persist is ________.

• A) technical trends in prices
• B) momentum effects
• C) fundamental risk
• D) trend reversals

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Definitions:

Current Employees

Individuals who are actively working for an organization at a given time.

Government Fund

A financial allocation from the government aimed at supporting specific projects, sectors, or initiatives, often involving public resources.

Cafeteria-Style Benefits Plans

Allow employees to choose those benefits they really want.

Adverse Selection

A situation in economics and insurance where a party’s lack of information leads to a transaction with another party who has a distinct advantage, often seen in markets for goods like used cars or in health insurance.