finc 6000 group assignment
1. Describe the background of auction: contents, name of auction house, time, location, history of auction house, etc.
Pickles Auctions is the largest auction group in Australia which was established in 1964(About pickles auctions - australia's largest auction group 2014 ).The head office of Pickles Auctions is located in Sydney and 22 branches were set up around Australia. Pickles Auctions sells a broad range of vehicle types which includes Ex-Government, Fleet, Repossessed, Light Commercials, 4WD, Prestige, Luxury, Classic and Exotic Motor Vehicles(About pickles auctions - australia's largest auction group 2014 ).
The Luxury Vehicle Auction is a public auction held on the 15th September 2014 at 6:00pm. It …show more content…
In terms of the cumulative distribution functions of two assets, one asset is said to be dominant over another if the accumulated area under the CDF of y must be greater than the accumulated area for x, below any given level of price. In the chart, it is said that the CDF of two prices can cross.
The chart below describes the cumulative area under the CDF for each state of estimated prices and realized prices. Clearly, from the chart, the second-order dominance exists between the two prices and we can infer a conclusion that realized prices dominant estimated prices in second order. Overall, the prices provided by the bidders are less than the estimation of the auctioneer; this is not in favor of the profits of the auctioneer.
b) Mean-variance Criteria
Mean -variance analysis assumes distributional normality. Obviously, the estimated prices and the realized are not normally distributed as the chart below shows, therefore, the mean-variance criteria cannot be used as a decision rule to analysis whether one is preferred to the other as a conclusion. However we can work out some useful information