On statistical indistinguishability of complete and incomplete discrete time market models

DOI10.1007/S10203-023-00397-YMaRDI QIDQ6089405zbMATH OpenOpenAlexFDO

Authors Nikolai Dokuchaev

Publication date 17 November 2023

Published in Decisions in Economics and Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1505.00638

zbMATH Keywords

forecastingmarket completenessmarket incompletenessprice statistics

Mathematics Subject Classification ID

Financial markets (91G15)

Abstract: We investigate the possibility of statistical evaluation of the market completeness for discrete time stock market models. It is known that the market completeness is not a robust property: small random deviations of the coefficients convert a complete market model into a incomplete one. The paper shows that market incompleteness is also non-robust. We show that, for any incomplete market from a wide class of discrete time models, there exists a complete market model with arbitrarily close stock prices. This means that incomplete markets are indistinguishable from the complete markets in the terms of the market statistics.

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