In the absence of an effective short-selling mechanism, security prices will tend to be biased toward the ________, causing a market to depart from the standards of a perfect price-setting situation.

Question

Quizplus · Accepted Answer

In the absence of an effective short-selling mechanism, security prices will tend to be biased toward the view of more optimistic investors, as they are the ones who are willing to buy the securities at higher prices. This bias can lead to prices that do not accurately reflect the true value of the security and can cause the market to depart from the standards of a perfect price-setting situation.

In the Absence of an Effective Short-Selling Mechanism, Security Prices