The concept that well-capitalized, rational traders may be unable to correct a mispricing defines which one of the following terms?

Question

Quizplus · Accepted Answer

The concept that well-capitalized, rational traders may be unable to correct a mispricing due to various factors such as transaction costs, liquidity constraints, or asymmetric information is known as limits to arbitrage. Therefore, choice C is the correct answer. Noise trading bounds (A) and sentiment borders (E) are not widely used terms in finance, while market bounds (B) and implementation limits (D) are not specifically related to the inability of traders to correct mispricings.

The Concept That Well-Capitalized, Rational Traders May Be Unable to Correct