Question (a) In the next period there are three possible states of the world: recession (with probability 0.3), normal growth (with probability 0,4), and expansion (with probability 0.3). There are two stocks (stock A and stock B) in the economy. The stocks will yield payoffs next period according to the following table: i) Can you rank the stocks by the criterion of first order stochastic dominance? If you can rank them, which stock first order stochastically dominates the other? You may use a graph to answer this question if you choose to. ii) Can you rank the stocks by the criterion of second order stochastic dominance? If you can rank them, which stock second order stochastically dominates th

e other? You may use a graph to answer this question if you choose to iii) Give an explanation of second order stochastic dominance in words (i. e, not using any equations).

a) In the next period there are three possible states of the world: recession normal growth (with probability 0.4), and expansion (with probability stocks (stock A and stock B ) in the economy. The stocks will yield pay according to the following table: i) Can you rank the stocks by the criterion of first order stochastic d rank them, which stock first order stochastically dominates the ot] graph to answer this question if you choose to. ii) Can you rank the stocks by the criterion of second order stochasti rank them, which stock second order stochastically dominates the graph to answer this question if you choose to. iii) Give an explanation of second order stochastic dominance in word equations)