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Explain three types of risks and costs faced by an economic agent who tries to arbitrage: Fundamental risk Implementation costs Noise trader risk Suppose a

Explain three types of risks and costs faced by an economic agent who tries to arbitrage:

  • Fundamental risk
  • Implementation costs
  • Noise trader risk

Suppose a fund manager offers you to invest in his fund because in the last three years the fund has delivered higher returns on investment than the stock market index. Explain why this argument would or wouldn't convince you?

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