1.   It is a disequilibrium situation which can not survive as it offers investors a profitable arbitrage opportunity.

2.   When they allowed for four different levels of transactions costs, they concluded that many potential opportunities for profitable arbitrage remained.

3.   It is a disequilibrium situation which cannot survive as it offers investors a profitable arbitrage opportunity.

4.   The process will continue until there are no more profitable arbitrage opportunities.

5.   If the returns of all securities lay on this line there would be no opportunities for profitable arbitrage.

6.   By constructing a portfolio of efficiently priced assets, the investor can create opportunities for profitable arbitrage if there are assets or portfolios that have been underpriced or overpriced.

7.   If these conditions do not hold there will be a diversion in the market valuations of the equity of the two companies and profitable arbitrages would arise.