Question
According to behavioral finance, the power of arbitrage is limited by market imperfections and the limited arbitrage results in market inefficiency. All of the followings
According to behavioral finance, the power of arbitrage is limited by market imperfections and the limited arbitrage results in market inefficiency. All of the followings limit the power of smart investors arbitrage EXCEPT __.
Group of answer choices
Idiosyncratic risk, which arises when the securities longed and securities shorted are not exactly the same in characteristics.
Short-selling restrictionsin some countries short selling is not allowed and even in countries where short-selling is allowed, shorting still faces various restrictions.
Systematic risk, which is the risk that cannot be diversified away.
Capital constraints, which arises when the arbitrageur uses not his/her own money but his/her clients money or/and borrowed money for arbitrage
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