Market Efficiency Paper, business and finance homework help

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Terrasybjre

Business Finance

Description

I want you to explore and compose two short paper concerning.

First: Market Efficiency

This is the first of two topics that I want you to explore and compose a short paper concerning.

In this paper, I want you to reference 3 outside sources. There are HUNDREDS, so I would not imagine that any of you would have the same reference. In this paper, I want you to find information and write up a short paper on: what market efficiency means, what it means for large institutional investors attempt to beat the market, and why this influences the way that small investors tend to invest. I also want to you find reference sources to discuss whether markets are indeed efficient or is this simply not possible.

The paper should be 3 pages and length and on the 4th page, list your references.

Second:Arbitrage

This is the second of two topics that I want you to explore and compose a short paper concerning.

In this paper, using 3 outside sources, discuss how arbitrage works, how an investor could use that to profit, and how the concept of market efficiency could hamper its effectiveness. You should be able to find an almost unlimited supply of resources on this one.

The paper should be 3 pages and length and on the 4th page, list your references.


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Explanation & Answer

Attached.

Running head: ARBITRAGE

1

Arbitrage
Name
Institutional Affiliation

ARBITRAGE

2

Arbitrage
Arbitrage refers to the simultaneous sale and purchase of an asset in order to make a
profit from the price difference (Fama & French, 2004). This is a trade founded on exploiting the
differences in pricing or similar financial instruments on distinct markets or forms. Arbitrage
exists owing to market inefficiencies. Arbitrage offers a mechanism that ensures that prices do
not substantially deviate from fair value for extended periods of time. Technological
advancements have made it hard to make profits from errors in pricing. Trading systems have
been computerized to look at fluctuations in financial instruments. Inefficiency in pricing is acted
upon and the chance to profit is eliminated (Fama & French, 2004). Arbitrage is a financial
market tool that is a necessary force. In a stock market context, traders take advantage of
arbitrage opportunities. In a perfectly efficient market, arbitrage would be eliminates. However,
markets are seldom perfect. Notably, even when a discrepancy in pricing of similar goods, an
arbitrage opportuni...


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