Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 1, 2021 erstellt
Description:
Macroeconomic variables are composed by agent’s variables. In turn, sums of agent’s trade values or volumes determine evolution of agent’s variables. In conclusion, agent’s expectations govern agent’s trade decisions. We consider economic agents, agent’s variables, agent’s trades and expectations as simple bricks for constructing theoretical description of economic processes. We note models that describe variables determined by sums of market trades during certain time interval Δ as the first-order economic theories. We show that the first-order economic theories should be complemented by models that describe sums of squares of trades. Trade decisions substantially depend on market price and volatility forecasts. We show that predictions of price volatility equal descriptions of sums of squares of trade values and volumes during Δ. We call modeling variables composed by sums of squares of market trades as the second-order economic theories. Prediction of market price probability equals description of sums of n-th power of values and volumes of market trades for all n. We argue that n-th statistical moments of trade value, volume and price describe, among other things, impact of proportions of high and low volumes and values trades on market dynamics. Limited capacity for prediction of number of price and trade statistical moments restricts accuracy of price probability forecasting and confines correctness of economic theories