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Suppose we observe from market data that, for a given non-dividend paying stock, 0 0. What might explain the inequality in this relationship (i.e. why
Suppose we observe from market data that, for a given non-dividend paying stock, 0 0. What might explain the inequality in this relationship (i.e. why dont we observe = ) if markets are efficient? Hint: try to identify real-world market frictions that might cause cases where does not result in arbitrage opportunities
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