Question: QUESTION ONE ( a ) Identify and describe the major obstacles to arbitrage faced by arbitrageurs. ( b ) De Long, Shleifer, Summers, and Waldmann

QUESTION ONE (a) Identify and describe the major obstacles to arbitrage faced by arbitrageurs. (b) De Long, Shleifer, Summers, and Waldmann (1990) derives the following pricing function for a risky asset: i) Explain what each notation represents in the equation. ii) Using the equation, evaluate how the model generates mispricing.

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