n NISM Certifications
X NISM Series X
Medium

Market bubbles persist primarily due to the asynchronous timing of arbitrageurs, as their inability to act synchronously prolongs the mispricing of assets.

Practice question from NISM Series XB- Investment Adviser (Level 2) Mock Test 2 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Due to loss aversion attitude of investors

  2. Due to asynchronous timing of arbitrageurs

    Correct answer

  3. C

    Due to regular buying support from hedgers

  4. D

    Due to long-term view of speculators

Why this is the answer

Bubbles are sustained because arbitrageurs, acting at different times and with varying incentives, do not correct overpricing immediately, leading to prolonged bubbles.

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