All of the following create limits to arbitrage except:
A) firm-specific risk.
B) noise traders.
C) thinly traded securities.
D) rational traders.
E) implementation costs.

Question

Quizplus · Accepted Answer

Rational traders actually facilitate successful arbitrage opportunities by exploiting mispricings in the market. The other options listed create barriers to arbitrage, such as firm-specific risk, which can deter investors from taking on large positions in a single company; noise traders, who can cause erratic price movements that are not based on fundamental data; thinly traded securities, which can make it difficult to buy and sell large positions in a timely manner; and implementation costs, which can eat away at the profitability of arbitrage trades.

All of the Following Create Limits to Arbitrage Except