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Financial Economics

In: Business and Management

Submitted By wazzautd
Words 867
Pages 4
Q1 (i) Histogram for the return on Asset A

Asset A –Frequency Distribution

Class Intervals-Return | | Frequency | Cumulative Frequency | Class Width | Frequency Density | Probability | Cumulative Probability | -8% | -7% | 1 | 1 | 0.01 | 100 | 0.0000 | 0.0000 | -7% | -6% | 1 | 2 | 0.01 | 100 | 0.0002 | 0.0002 | -6% | -5% | 7 | 9 | 0.01 | 700 | 0.0002 | 0.0004 | -5% | -4% | 16 | 25 | 0.01 | 1600 | 0.0014 | 0.0018 | -4% | -3% | 42 | 67 | 0.01 | 4200 | 0.0032 | 0.0050 | -3% | -2% | 113 | 180 | 0.01 | 11300 | 0.0084 | 0.0134 | -2% | -1% | 224 | 404 | 0.01 | 22400 | 0.0226 | 0.0360 | -1% | 0% | 408 | 812 | 0.01 | 4200 | 0.0448 | 0.0808 | 0% | 1% | 591 | 1403 | 0.01 | 59100 | 0.0816 | 0.1624 | 1% | 2% | 714 | 2117 | 0.01 | 71400 | 0.1182 | 0.2806 | 2% | 3% | 826 | 2943 | 0.01 | 82600 | 0.1428 | 0.4234 | 3% | 4% | 725 | 3668 | 0.01 | 72500 | 0.1652 | 0.5886 | 4% | 5% | 536 | 4204 | 0.01 | 53600 | 0.1450 | 0.7336 | 5% | 6% | 391 | 4595 | 0.01 | 39100 | 0.1072 | 0.8408 | 6% | 7% | 211 | 4806 | 0.01 | 21100 | 0.0782 | 0.9190 | 7% | 8% | 120 | 4926 | 0.01 | 12000 | 0.0422 | 0.9612 | 8% | 9% | 52 | 4978 | 0.01 | 5200 | 0.0240 | 0.9852 | 9% | 10% | 11 | 4989 | 0.01 | 1100 | 0.0104 | 0.9956 | 10% | 11% | 9 | 4998 | 0.01 | 900 | 0.0022 | 0.9978 | 11% | 12% | 2 | 5000 | 0.01 | 200 | 0.0018 | 0.9996 | | Total | 5000 | | | | 0.0004 | 1.0000 |

ii) Whether one asset stochastically dominates the other to first order:

First-order Stochastic Dominance theorem states that: If the CP for A≤P for B for all return outcomes, with strict inequality (CP for A | 0.0000 | -6% | 0.0004 | > | 0.0000 | -5% | 0.0018 | > | 0.0002 | -4% | 0.0050 | > | 0.0010 | -3% | 0.0134 | > | 0.0070 | -2% | 0.0360 | > | 0.0278 | -1% | 0.0808 | < | 0.1000 | 0% | 0.1624 | < | 0.2720 | 1% | 0.2806 | < | 0.5158 | 2% | 0.4234 | < | 0.7556...

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