Individuals that continually monitor the financial markets seeking mispriced securities:
A)tend to make substantial profits on a daily basis.
B)tend to make the markets more efficient.
C)are never able to find a security that is temporarily mispriced.
D)are always quite successful using only well-known public information as their basis of evaluation.
E)are always quite successful using only historical price information as their basis of evaluation.

Question

Quizplus · Accepted Answer

Individuals that continually monitor the financial markets seeking mispriced securities are known as arbitrageurs. Their actions help make the markets more efficient by correcting temporary mispricings. While they may still make profits, this is not guaranteed and depends on the efficiency of the market at the time. The success of their evaluations also depends on a variety of factors beyond just historical or public information.

Individuals That Continually Monitor the Financial Markets Seeking Mispriced Securities