What is a peso problem? Explain the term within the context of its original derivation. Now, explain how peso problems can generally plague the study of financial market returns.

Answer: A phenomenon called the peso problem arises when rational investors anticipate events that do not occur during the sample or at least do not occur with the frequency the investors expect. This invalidates statistical inferences conducted under th
Answer: A phenomenon called the peso problem arises when rational investors anticipate events that do not occur during the sample or at least do not occur with the frequency the investors expect. This invalidates statistical inferences conducted under the rational expectations assumption based on data drawn from the period. The...