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Riskless, costless arbitrage is the cornerstone of the efficient market hypothesis. However, multiple unavoidable risks in securities markets inhibit arbitrage as defined in financial theory
Riskless, costless arbitrage is the cornerstone of the efficient market hypothesis.
However, multiple unavoidable risks in securities markets inhibit arbitrage as defined in financial theory (and investment textbooks) from successfully eliminating mispricing.
Please list two of these unavoidable risks and briefly explain how each limits arbitrage in practice.
Use an example to make your case for each risk.
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