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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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Wednesday, May 07, 2008
Ohio Celebrates National Leadership Position in Aerospace Industry
Comtex
COLUMBUS, Ohio, May 7, 2008 /PRNewswire via COMTEX News Network/ ----World leaders in the aerospace industry today celebrated Ohio Aerospace Day, an event that brings to light Ohio's historic strengths and dedication to developing future innovations in the aerospace industry. According to the Ohio Business Development Coalition, the nonprofit organization that markets the state for capital investment, Ohio is a national leader in the aerospace industry and continues to drive business growth both within the state and throughout the world.
(Logo: http://www.newscom.com/cgi-bin/prnh/20071107/CLW113LOGO )
"Ohio is a national leader in aerospace, and no state can match our capabilities in aerospace propulsion and power -- from basic and advanced research, to technology development, to systems development, to sourcing of component suppliers, and final product testing," said Mike Heil, president of the Ohio Aerospace Institute. "Ohio Aerospace Day has helped our state develop and publicize our strengths to remain a leader in the rapidly growing world aerospace economy."
Ohio Aerospace Day is designed to increase awareness of the importance of aerospace to Ohio's economy, enlighten citizens about Ohio's capabilities in aerospace, increase the competitive position of Ohio's aerospace industry through dialogue, and exchange ideas on public policies and strategic partnerships that can enhance Ohio's position in the global aerospace market.
Representatives from many of Ohio's more than 600 private companies working in the aerospace and defense industry met with key leaders from around the state representing government, industry and academia. According to the Ohio Business Development Coalition, collaboration among these entities is one of the driving factors behind Ohio's success in the rapidly growing world aerospace economy.
Ohio's aerospace industry is supported by the state's Third Frontier Program, a $1.6 billion initiative to help catalyze connections between companies and academia. The project is the state's largest-ever commitment to expand high-tech research capabilities, promote innovation, company formation and create high-paying jobs.
Only Ohio can boast two federal laboratories, ten leading universities with dedicated doctoral level research and education programs in aerospace related disciplines, and more than 450 aerospace manufacturers and suppliers all working in collaboration to develop innovative solutions for the nation's aerospace needs. These entities, along with Ohio's internationally renowned federal aerospace research centers, attract the industry's top talent to provide limitless opportunities in aeropropulsion and power research and development, manufacturing innovation and commercialization of aerospace components and products.
"Businesses in the aerospace industry recognize the benefits of locating in Ohio," said Ed Burghard, executive director of the Ohio Business Development Coalition. "Owners profit from the state's newly revamped tax code as well as the bottom-line benefits of better work:life balance for their employees. Ohio offers low-cost, low stress communities and a unique mix of micropolitan and metropolitan cities. This diversity provides executives and employees the resources and time to pursue their professional goals and personal aspirations without having to compromise one for the other. Ohio truly is the state of perfect balance."
About the Ohio Business Development Coalition
The Ohio Business Development Coalition (OBDC) is a nonprofit organization that markets the state for capital investment. The OBDC provides marketing strategy and implementation to support Ohio's economic development efforts. For more information on business development or business relocation, visit www.ohiomeansbusiness.com .
For more information about Ohio's aerospace industry, view the complete industry brochure at www.ohiomeansbusiness.com/key/aerospace.php .
SOURCE Ohio Business Development Coalition
http://www.ohiomeansbusiness.com
Copyright (C) 2008 PR Newswire. All rights reserved
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