Which of the following are impediments to the correction of a security's mispricing?
I. sentiment-based risk
II. implementation costs
III. firm-specific risk
IV. noise trader risk

Question

Quizplus · Accepted Answer

Sentiment-based risk, implementation costs, firm-specific risk, and noise trader risk can all impede the correction of a security's mispricing. Sentiment-based risk and noise trader risk can lead to irrational trading behaviors that distort prices. Implementation costs can make it financially unviable to exploit mispricings. Firm-specific risk can deter arbitrageurs due to the unpredictability of returns related to specific companies.

Which of the Following Are Impediments to the Correction of a Security's