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Empirical microeconomics action functionals

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  • Baaquie, Belal E.
  • Du, Xin
  • Tanputraman, Winson

Abstract

A statistical generalization of microeconomics has been made in Baaquie (2013), where the market price of every traded commodity, at each instant of time, is considered to be an independent random variable. The dynamics of commodity market prices is modeled by an action functional–and the focus of this paper is to empirically determine the action functionals for different commodities. The correlation functions of the model are defined using a Feynman path integral. The model is calibrated using the unequal time correlation of the market commodity prices as well as their cubic and quartic moments using a perturbation expansion. The consistency of the perturbation expansion is verified by a numerical evaluation of the path integral. Nine commodities drawn from the energy, metal and grain sectors are studied and their market behavior is described by the model to an accuracy of over 90% using only six parameters. The paper empirically establishes the existence of the action functional for commodity prices that was postulated to exist in Baaquie (2013).

Suggested Citation

  • Baaquie, Belal E. & Du, Xin & Tanputraman, Winson, 2015. "Empirical microeconomics action functionals," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 428(C), pages 19-37.
    • Handle: RePEc:eee:phsmap:v:428:y:2015:i:c:p:19-37
    DOI: 10.1016/j.physa.2015.02.030
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    References listed on IDEAS

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    1. Coyle, David & DeBacker, Jason & Prisinzano, Richard, 2012. "Estimating the supply and demand of gasoline using tax data," Energy Economics, Elsevier, vol. 34(1), pages 195-200.
    2. Baaquie, Belal E. & Cao, Yang & Lau, Ada & Tang, Pan, 2012. "Path integral for equities: Dynamic correlation and empirical analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(4), pages 1408-1427.
    3. Baaquie, Belal E., 2013. "Statistical microeconomics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(19), pages 4400-4416.
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    Cited by:

    1. Mauricio Contreras G, 2020. "An Application of Dirac's Interaction Picture to Option Pricing," Papers 2010.06747, arXiv.org.
    2. Baaquie, Belal Ehsan, 2019. "A statistical model of the firm," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 524(C), pages 392-411.
    3. Baaquie, Belal E. & Yu, Miao & Du, Xin, 2016. "Multiple commodities in statistical microeconomics: Model and market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 462(C), pages 912-929.

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