Statistical microeconomics and commodity prices: theory and empirical results

A review is made of the statistical generalization of microeconomics by Baaquie (Baaquie 2013Phys. A 392, 4400–4416. (doi:10.1016/j.physa.2013.05.008 )), where the market price of every traded commodity, at each instant of time, is considered to be anindependent random variable . The dynamics of commodity market prices is given by the unequal time correlation function and is modelled by the Feynman path integral based on anaction functional . The correlation functions of the model are defined using the path integral. The existence of the action functional for commodity prices that waspostulated to exist in Baaquie (Baaquie 2013Phys. A 392, 4400–4416. (doi:10.1016/j.physa.2013.05.008 )) has beenempirically ascertained in Baaquieet al. (Baaquieet al. 2015Phys. A 428, 19–37. (doi:10.1016/j.physa.2015.02.030 )). The model's action functionals for different commodities has been empirically determined and calibrated using the unequal time correlation functions of the market commodity prices using a perturbation expansion (Baaquieet al. 2015Phys. A 428, 19–37. (doi:10.1016/j.physa.2015.02.030 )). Nine commodities drawn from the energy, metal and grain sectors are empirically studied and their auto-correlation for up to 300 days is described by the model to an accuracy ofR 2 >0.90—using only six parameters.