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A popular Wendy's commercial in the 80s made famous the question: "Where's the beef?" Good one. And here's an even better one: "Where's the alpha?" You might want to whip this one out the next time you meet with your portfolio manager.
Alpha is the over-and-above-the-expected return. It is the "value added." Therefore, it makes sense that a positive alpha means an investment has outperformed its market-predicted return, while a negative alpha would mean just the opposite. The expected return is calculated by a formula that takes into account the investment's level of unavoidable risk (aka beta).
Ever stepped into an elevator and after the doors close you become aware of an almost-suffocating scent coming from the woman next to you who must have bathed in perfume? Well, as you know, once the doors close you can't escape the smell until the ride is over. This is similar to beta, which is risk that can't be reduced or diversified away. A measure of "systematic" or market related risk, beta is used as a measure relative to a certain index -- such as the S&P 500.
So, for example, let¿s say your portfolio is managed to compete against the S&P 500. If you generate a better return than the index while not taking on added risk (standard deviation of returns) then you get alpha. Low beta means the market-related risk is low and vice versa for high beta.
Another example, let's say a mutual fund or stock has a beta of 1.5 relative to the S&
P500 ¿ that means it is 1.5 times as risky. So, over time, if the S&P 500 goes up 1%, your portfolio should be up 1.5%
plus (one can hope) some percentage of alpha. If the S&P 500 is down 1%, your portfolio should be down 1.5%.
Alpha
and beta are based off of linear regression of a set of data. Warning: this may cause a high school fifth-period flashback,
but it will be over before you know it:
The equation for a line is Y = a + bX.
a = alpha (the Y intercept - the added
value)
b = Beta (the coefficient you multiply X by)
X = S&P 500 (in this case)
Y = your portfolio
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Monday, May 05, 2008
Biggest U.S. Mortgage Lenders
Comtex
DALLAS, May 5, 2008 /PRNewswire via COMTEX News Network/ ----First quarter mortgage originations tumbled from a year earlier but were better than the fourth quarter, according to an analysis of earnings data by http://www.MortgageDaily.com.
Among 14 of the largest U.S. primary lenders, residential volume was $370.6 billion during the first quarter 2008, down about 22 percent from the first quarter 2007 but up approximately 3 percent from the fourth quarter.
Countrywide Financial Corp., which is expected to be acquired by Bank of America Corp. during the third quarter, retained its No. 1 spot. While planned program cutbacks will likely push volume lower, total business from the merged operation should still leave the combined entity as the country's biggest mortgage lender.
Wells Fargo & Co. remained the No. 2 originator, though it cut Countrywide's lead. No. 3 was JPMorgan Chase & Co.
The following table ranks the five biggest lenders: Company Q1 2008 Originations Countrywide $73.0 billion Wells Fargo $66.0 billion JPMorgan $53.8 billion Bank of America $38.6 billion Citigroup $34.3 billion
Compared to the first quarter 2007, U.S. Bancorp saw the biggest increase -- jumping 86 percent. Flagstar Bancorp Inc. was up 44 percent, and First Horizon National Corp. managed a 19 percent increase.
The biggest decrease from a year earlier was seen by IndyMac Bancorp Inc. -- which tumbled 63 percent. Washington Mutual Inc. slid 60 percent from the first quarter 2007, while Residential Capital LLC was down 40 percent.
Flagstar's first quarter 2008 originations were 22 percent higher than the fourth quarter -- the biggest increase of any lender. Both U.S. Bancorp and ResCap jumped 21 percent during the same period.
The biggest decline from the fourth quarter was seen by WaMu, which fell 34 percent. IndyMac was next, with a 21 percent drop, followed by National City Corp., which was off 15 percent.
Complete mortgage production data is available to MortgageDaily.com subscribers at: http://www.mortgagedaily.com/FundingsConforming.asp?spcode=pr
About MortgageDaily.com
Founded in 1998, MortgageDaily.com is a dominant online news source for the mortgage industry. Around one million mortgage business news pages are viewed monthly at MortgageDaily.com and its affiliate publications.
CONTACT: Sam Garcia 214.521.1300 3811-700 Turtle Creek Blvd. Dallas, TX 75219
SOURCE MortgageDaily.com
Copyright (C) 2008 PR Newswire. All rights reserved
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