Well, right now I’m counting backward for the next 48 hours to go to my final exam. I’ve completely done nothing within these week, three assignment left make my wanna burn myself alive, I can’t even organize my own lunch, dinner, even my breakfast time. Every time I have an hour to read or just doing the simple calculation it will end up on browsing every website that I never wanted to go before, checking inbox in my email even I know that I already setup the mail alert for each new mail coming, even open my own friendster and facebook profile that I change every time log on to that social networking site.

I need to study for my final exam, no my mistake, I “must” study. Ok, I need to change my method then. If I can’t study because of this technology-human-made called Internet, so I just study on it

Obviously, you can stop reading this post if you want to, but if you keep insisted, please keep silent and lower your voice when read it [Don't disturbed, I'm Studying]

Q1. If you are an investor and have the right to choose a fund manager between Joe, who can managed the fund and get yourself return for 10% or Marry, Who can give a lot more return around 15%, which one will you choose?

A1: It depends on how you measures the return,

(1) Jensen measurement

-] Look at the portfolio with the same Beta (B) and define the distance between the portfolio with security market line(SML) also known as Jensen alpha (Ja)

-] Who have the higher alpha have the better performance (by the amount that beat the market)

(2) Treynor measurement

-] Look excess over the market and divided per Beta (B) you choose

-] Compare with the slope, for every B give a better performance

(3) Sharpe ratio

-] Return / Sigma (V)

I do remember this part, my lecture called it as “resurrection of sigma”, sigma dead now it come a live.The logic is : If we want to beat the market, so we need diversification by use sigma (v) as a good measure of risk.

Q2: What does it mean by moral hazard

A2: A condition when the contract changes some one behavior that set aside the risk into the other side (e.g. Insurance)

-] screening resolution : give some menu, and pick one

-] signaling resolution : separating equilibrium, to prevent competitor to mimicking the good one

-] uniary signaling : the way to differentiate, which is costless

-] adverse selection : only sick people will bought an insurance, the healthy one will feel it to expensive.

-] self selection : selecting by your own

Great!!, this method seems working for me, at least I learn two question today, the rest of it is some calculation and reading, which I can’t do it here. Urrgh…. back to conventional way then. I’m gonna back to sleep now, dreaming my big days will coming in the next 24 hours, wish me luck.