Capital Market Theory

You've been studying the returns of three recently introduced virtual currencies: acoin, bCoin and ccoin. You find that the distributions of their returns are well approximated by the following distributions: aCoin: Uniform over the interval [-0.15,0.20] bcoin: Uniform over the interval (-0.10,0.20] Coin: 20% probability of a 0.025 return, and otherwise uniform over the interval [-0.15,0.20] HINT: The cumulative distribution function of a uniform random variable over the interval [a, b] is given by F(x) = *; its mean is given by at be 2. Make one graph comparing the CDF's (Cumulative Distribution Functions) of the three return distributions. 3. Given the above information, what can you conclude about: a. First-Order Stochastic Dominance of the three distributions? b. Second-Order Stochastic Dominance of the three distributions? Justify yours answers You've been studying the returns of three recently introduced virtual currencies: acoin, bCoin and ccoin. You find that the distributions of their returns are well approximated by the following distributions: aCoin: Uniform over the interval [-0.15,0.20] bcoin: Uniform over the interval (-0.10,0.20] Coin: 20% probability of a 0.025 return, and otherwise uniform over the interval [-0.15,0.20] HINT: The cumulative distribution function of a uniform random variable over the interval [a, b] is given by F(x) = *; its mean is given by at be 2. Make one graph comparing the CDF's (Cumulative Distribution Functions) of the three return distributions. 3. Given the above information, what can you conclude about: a. First-Order Stochastic Dominance of the three distributions? b. Second-Order Stochastic Dominance of the three distributions? Justify yours answers