Efficient markets are those in which assets trade at their fair prices. Any arbitrage opportunity caused by a mispricing is exploited fast by competing investors.

How do investors exploit arbitrage opportunities? The principle is to buy cheap and sell dear. Let me give you an example. Suppose that (identical) shares of a multinational corporation are trading for $11 on the New York Stock Exchange (NYSE) and for £6 on the London Stock Exchange (LSE). Moreover, suppose that the exchange rate is £0.5/$1 at the moment. Then, the shares trading on NYSE are worth $11 * (£0.5/$1) = £5.5, which means that they are cheaper compared to those trading on LSE.

An investor (let's assume he is American and prefers to consume in US dollars) can take advantage of this mispricing with the following trading strategy:

This yields an arbitrage profit of $12 - $11 = $1. Don't think that this profit is too little, as it is the arbitrage profit per share. If you could follow this strategy with 100,000 shares, you would make a profit of $100,000.

Of course, this example is very stylised. I've ignored, among other things, transaction costs and the risk that the prices and/or the exchange rate can change before the investor completes the trading strategy. Yet, the principle is sound. When investors notice mispricings, they try to buy cheap and sell dear until the mispricing disappears. The premise of efficient market hypothesis is that mispricings disappear quickly in efficient markets, because the trading strategies that exploit mispricings work in a way that pulls prices back to their fair levels.