Arbitrage Is Based on the Idea That ________

question 70

Multiple Choice

Arbitrage is based on the idea that ________.

• A) assets with identical risks must have the same expected rate of return
• B) securities with similar risk should sell at different prices
• C) the expected returns from equally risky assets are different
• D) markets are perfectly efficient

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Definitions:

Just World

The belief that the world is fundamentally fair and individuals get what they deserve.

Group Polarisation

The tendency for a group to make decisions that are more extreme than the initial inclination of its members.

Intergroup Attribution

Process of assigning the cause of one’s own or others’ behaviour to group membership.

Ultimate Attribution Error

A cognitive bias where people attribute the positive behaviors of their own group to stable, internal characteristics and negative behaviors of out-groups to their inherent characteristics.