Olkhov, Victor (2023): Economic complexity limits accuracy of price probability predictions by gaussian distributions.
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Abstract
We discuss the economic reasons why the predictions of price and return statistical moments in the coming decades, in the best case, will be limited by their averages and volatilities. That limits the accuracy of the forecasts of price and return probabilities by Gaussian distributions. The economic origin of these restrictions lies in the fact that the predictions of the marketbased nth statistical moments of price and return for n=1,2,.., require the description of the economic variables of the nth order that are determined by sums of the nth degrees of values or volumes of market trades. The lack of existing models that describe the evolution of the economic variables determined by the sums of the 2nd degrees of market trades results in the fact that even predictions of the volatilities of price and return are very uncertain. One can ignore existing economic barriers that we highlight but cannot overcome or resolve them. The accuracy of predictions of price and return probabilities substantially determines the reliability of asset pricing models and portfolio theories. The restrictions on the accuracy of predictions of price and return statistical moments reduce the reliability and veracity of modern asset pricing and portfolio theories.
Item Type:  MPRA Paper 

Original Title:  Economic complexity limits accuracy of price probability predictions by gaussian distributions 
English Title:  Economic complexity limits accuracy of price probability predictions by gaussian distributions 
Language:  English 
Keywords:  price and return; market trade; risk ratings; statistical moments; probability predictions 
Subjects:  C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General > C18  Methodological Issues: General C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C53  Forecasting and Prediction Methods ; Simulation Methods E  Macroeconomics and Monetary Economics > E3  Prices, Business Fluctuations, and Cycles > E37  Forecasting and Simulation: Models and Applications F  International Economics > F1  Trade > F17  Trade Forecasting and Simulation F  International Economics > F3  International Finance > F37  International Finance Forecasting and Simulation: Models and Applications G  Financial Economics > G1  General Financial Markets G  Financial Economics > G1  General Financial Markets > G17  Financial Forecasting and Simulation 
Item ID:  120636 
Depositing User:  Victor Olkhov 
Date Deposited:  12 Apr 2024 14:27 
Last Modified:  12 Apr 2024 14:27 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/120636 
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Economic complexity limits accuracy of price probability predictions by gaussian distributions. (deposited 25 Aug 2023 07:37)
 Economic complexity limits accuracy of price probability predictions by gaussian distributions. (deposited 12 Apr 2024 14:27) [Currently Displayed]