Finance

Two problems in estimating the expected real return on the market are dealt with: (1) the absence of reliable real data, (2) the absence of observations of market (i.e., economy-wide) returns. By combining financial and monetary theory, a general equilibrium model is constructed, both in a single-economy and a multi-economy setting, which indicate the variables to be used to avoid the estimation problems: (1) nominal stock index returns, (2) money supply data, (3) foreign exchange rate data. ...