The only way for behavioural patterns to persist in prices is if ________.
A)markets are not weak form efficient
B)there are limits to arbitrage activity
C)there are no significant trading costs
D)market psychology is inconsistent over time

Question

Quizplus · Accepted Answer

The persistence of behavioural patterns in prices is only possible if there are limits to arbitrage activity. If arbitrage opportunities are unlimited, then traders would take advantage of any deviations from the underlying fundamentals, effectively eliminating any persistent behavioural patterns in prices. The other options (A, C, D) are not directly related to the persistence of behavioural patterns in prices.

The Only Way for Behavioural Patterns to Persist in Prices