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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
Home / Markets
Tuesday, September 06, 2005
Return of the Undead
Smart Money
Not only is the minivan still kicking — its latest incarnations are stronger.
Over the past couple of years, with the rise of SUVs and crossover vehicles like the Chrysler Pacifica, some auto experts have gleefully declared the minivan dead. As it turns out, it was only resting. This summer Toyota and Nissan both rolled out new, vastly improved versions of their Sienna and Quest minivans. So to select this SmartMoney Award winner, we looked at five of the more popular higher-end minivans on the market, including the redesigned 2004 Nissan Quest and Toyota Sienna. (All other test cars are 2003 models, but they continue without major changes, except where noted.)
Chrysler Town &
Country
Chrysler has positioned its Town & Country as a "luxury minivan." But with this latest crop of minivans,
does that label mean anything? All the vans I drove offered leather seats and DVD entertainment systems with wireless headsets.
While the Town & Country's interior is posh, its edge over the Toyota Sienna or Nissan Quest is debatable. At any rate,
it's not an edge worth $3,500 — roughly the difference between the stickers of the Town & Country and the loaded
Sienna I drove.
Luxury also usually means having features no one else offers. Chrysler has been a minivan innovator, but this model lags behind. The Town & Country's best features — the power liftgate and the storage-bin console — are also on the new Sienna. It's time Chrysler does some borrowing of its own — like the flat-folding third-row seats it may be adding next year. The current third-row seats must be removed for a flat load floor — and they're heavy.
The Town & Country is pleasant to drive, with plenty of power and reasonably nimble handling. One other feature it could borrow: a five-speed transmission. The four-speed in the current model is sometimes hesitant.
Pontiac
Montana
To paraphrase Benjamin Braddock's neighbor in The Graduate, one word: plastics. They dominate much of
the Montana, not just on the dash, but also on the exterior, where Pontiac's trademark ribbed plastic cladding mars an otherwise
decent-looking van.
Unfortunately, it's also missing some must-have features. The rear seats fold forward but must be removed for maximum cargo space. The Montana also seems to lack places to stash stuff — in place of a console bin, there's a sort of net slung between the front seats.
Its suspension performed well on rough roads. But the engine falls short, delivering just 185 hp. Coupled with a vacillating transmission, it made for uncertain moments while passing.
Nissan Quest
Do parents want a sexy minivan? Nissan's willing to bet on it. And the styling
is pretty radical. The beltline swoops up toward the rear. The grille and headlights resemble those on the new Maxima sedan.
Inside, the audio and AC controls are on an oval panel in the middle of the dash. Unfortunately, the gearshift is also on
the panel and blocks the driver's view of the climate-control knob. Another gripe: the plasticky quality of the leather seats.
The Quest is reasonably fun to drive, with a 3.5-liter V-6 delivering 240 hp. And like the Odyssey, it really does handle like a sedan. But the turning radius is surprisingly large, making parking a pain. Still, the Quest deserves the most-improved-player trophy, transforming itself from an also-ran to a strong contender.
| The Best Minivan | |||||||
| The redesigned Toyota Sienna wins with convenience, comfort and utility — not to mention cupholders. | |||||||
| Car | Engine | Ride/ Handling | Int. Design/ Comfort |
Exterior Styling | Cargo Volume min*/max (cu. ft.) | Base Price** | Overall Rating*** |
| Toyota Sienna XLE | 3.3-liter V-6, 230 hp | 4 stars | 5 stars | 3 stars | 43.6/148.9 | $28,770 | 5 stars |
| Honda Odyssey EX | 3.5-liter V-6, 240 hp | 5 stars | 3 stars | 2 stars | 38.1/146.1 | $27,360 | 4 stars |
| Nissan Quest 3.5 SE | 3.5-liter V-6, 240 hp | 4 stars | 4 stars | 4 stars | 32.7/143.8 | $33,530 | 4 stars |
| Chrysler Town & Country Ltd. | 3.8-liter V-6, 215 hp | 3 stars | 3 stars | 3 stars | 20.0/167.9 | $37,730 | 3stars |
| Pontiac Montana EXT | 3.4-liter V-6, 185 hp | 2 stars | 2 stars | 1 stars | 32.3/140.7 | $26,820 | 2 stars |
| *
All seats in place. ** Automatic transmission; prices include destination charge. *** As driven. |
Toyota Sienna
If this contest were decided on cupholders alone, the Sienna would be the
clear victor: In my test car, which seats seven people, I counted 13.
Even with half that many cupholders, the redesigned Sienna would still come out on top. It's not the best-looking or best-driving minivan, but its mix of convenience, comfort and utility makes it the ideal family- and gear-hauler. Parents of young children will love the eight-passenger version, with a middle seat in the second-row bench that slides forward almost 13 inches: the perfect spot for a car seat, since it's accessible to the driver yet safer than the front seat. Many features, however, seem built in to counter the gripes of cranky kids: The windows on the sliding doors roll down, while optional sunshades on all rear seat windows eliminate hot spots. Third-row passengers have 39.5 inches of leg room, more than in any of the other vans I drove. And the Sienna has improved upon the fold-flat third-row seat: This third row is split 60/40, providing more possible configurations. It's also the easiest seat to fold of all the vans I tested.
The new Sienna is powered by a 3.3-liter V-6 that delivers 230 hp. It provided ample power and quick zero-to-60 runs, thanks in part to a smooth five-speed transmission. The only drawback: The steering felt somewhat numb. But once you've learned to keep this van in line, the ride is plush and quiet, almost like a Lexus.
Honda Odyssey
With such strong competition from Toyota and Nissan, you may wonder where that leaves the Honda Odyssey. Though the value-oriented
Dodge Caravan has long been the bestseller in the class, for the past few years the Odyssey has achieved the rare feat of
being a minivan that upwardly mobile parents actually lust after. A chief reason was that "magic" flat-folding third-row seat,
which is fast becoming an industry standard. But another undeniable draw is that the Odyssey was, and still is, the best-driving
minivan you can buy. It really does handle like a sedan: taut, responsive steering, a relatively low center of gravity and
smooth acceleration.
But as far as versatility and comfort go-considerations that often trump driving pleasure for most minivan buyers-the Odyssey is no longer top of the class. Compared with the Sienna's 60/40 split third row, the Odyssey's one-piece bench seat seems a little less magical. The Odyssey also lacks options that lesser competitors offer, like a power rear liftgate. And while Honda's few option packages usually simplify the buying process, in this case, they are rather maddening: You can't get both the factory-installed entertainment system and the navigation system on the same vehicle-and to get either option, you have to pony up for leather seats.
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