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Why Arbitrage Opportunities imply that the Efficient Market Hypothesis hold ? Explain...

Why Arbitrage Opportunities imply that the Efficient Market Hypothesis hold ? Explain...

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Answer #1

According to the efficient market hypothesis, financial markets debt to reflect the prices of the stocks at any given time and therefore it is a fact that financial markets are information efficient and in this regard if there are investors who feel over exposed to the information this can lead to excess hedging or liquidation and in this case the information loss the person to buy and sell security potful used simultaneousl where this intensive approach can get to earn profits with the trends and this is arbitrage. Therefore this profits situation that is arising from pricing inefficiencies imply that arbitrage opportunities imply efficient market hypothesis to hold true

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