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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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Friday, May 16, 2008
Mercedes-Benz Remembers Automotive Historian Beverly Rae Kimes
Comtex
MONTVALE, N.J., May 16, 2008 /PRNewswire via COMTEX News Network/ ----Beverly Rae Kimes began writing about automotive history in 1963, after receiving a master's degree in journalism from Pennsylvania State University. She wrote hundreds of articles and wrote or edited over twenty books in the field, including My Two Lives: Race Driver to Restaurateur with Rene. Dreyfus, the French racing champion of the thirties.
(Logo: http://www.newscom.com/cgi-bin/prnh/20070709/NYM040LOGO )
In 1986, Kimes was commissioned to author and produce The Star and The Laurel: The centennial history of Daimler, Mercedes and Benz 1886-1986. The book features over 850 photographs and details the technical developments and achievements in the history of the automotive industry made by Daimler, Mercedes and Benz.
Kimes was the longtime editor of Automobile Quarterly and most recently The Classic Car Club of America. She also frequently contributed articles to The Star, the magazine of the Mercedes-Benz Club of America.
As an accomplished writer, her work was recognized by many auto industry peers. She received the McKean Trophy of the Antique Automobile Club of American and was a four-time recipient of the Karl Benz Award given by Society of Automotive Historians for her work in Automobile Quarterly that included the following articles: "The Nash Story," 1978 (Cugnot article); "Ken Purdy, King of the Road," 1994; "Austie," 1999; and "The Story Behind the Marmon 12," 2004.
"We are saddened by the passing of Beverly and our condolences go out to her family, friends and colleagues," said Mike Kunz, manager of the Mercedes- Benz Classic Center in Irvine, CA. "Beverly's significant contributions will be forever lasting throughout the Mercedes-Benz organization."
About Mercedes-Benz USA
Mercedes-Benz USA, headquartered in Montvale, New Jersey, is responsible the sales, marketing and service of all Mercedes-Benz and Maybach products in the United States. In 2007, MBUSA achieved an all-time sales record of 253,433 new vehicles, setting the highest sales volume ever in its history and achieving 14 consecutive years of sales growth. More information on MBUSA and its products can be found on the Internet at www.mbusa.com and www.maybachusa.com.
SOURCE Mercedes-Benz USA
http://www.mbusa.com
Copyright (C) 2008 PR Newswire. All rights reserved
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