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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 09, 2008
Physical Fitness 'Godfather' Jack LaLanne Turns to Brain Fitness, Becoming Ambassador for Dakim's [m]Power System
Comtex
SANTA MONICA, Calif., May 9, 2008 /PRNewswire via COMTEX News Network/ ----Dakim, Inc., announced today that 93-year-young Jack LaLanne, the world's most iconic figure in health and fitness, has signed on as a "brain fitness motivational coach" on behalf of the company's [m]Power Cognitive Fitness System, joining the company's efforts to help seniors fight against dementia.
Dakim's [m]Power is a touch screen-based brain workout program designed to help seniors combat a decline in mental function through a constantly changing series of rigorous but entertaining multimedia activities. It is now used in over 100 senior living communities around the country with a home unit due this summer.
LaLanne will offer motivational tips during [m]Power sessions as well as appear in promotional videos provided to senior living communities that use or are considering purchasing [m]Power units. LaLanne himself uses the [m]Power system, which was inspired by research showing that seniors who regularly exercise their brains can reduce their risk of dementia more than 60%.
"I've spent my life preaching the importance of physical fitness with the understanding that your brain doesn't die of old age, it dies of inactivity," LaLanne said. "I have added [m]Power to my workout regimen and have found that it helps keep my brain sharp as well as entertained, and I want to share that with EVERYBODY."
Widely known as the godfather of physical fitness, LaLanne has been a fitness innovator for more than 75 years and is recognized as the inventor of modern physical fitness and weight training. He designed many of the exercise machines that are now fitness industry standards, and he introduced several generations of people worldwide to the benefits of frequent exercise and improved nutrition from 1951 to 1985 on "The Jack LaLanne Show," the longest-running television program devoted to exercise.
Dakim's [m]Power is the first cognitive fitness system specifically designed to encourage the consistent, long-term use believed to help prevent the symptoms of dementia and Alzheimer's disease. Each 20- to 30-minute session features enjoyable game show-like interactive activities filled with film clips, music and other cultural references from seniors' generation while also exercising all of the cognitive domains considered necessary by neuropsychologists to keep brains agile.
[m]Power self-adjusts the level of difficulty across five levels of challenge ranging from active seniors with normal brain function to those suffering from moderate dementia and Alzheimer's disease. Exercises are updated on a daily basis so that seniors see new activities in every session, helping to promote ongoing use. Each system comes in a one-piece touchscreen unit with no computer mouse, keyboard or software to load.
About Dakim, Inc.
Dakim, Inc., is a provider of brain fitness programs for seniors. Dakim's [m]Power is a mental stimulation product designed to help seniors reduce their risk of dementia. The company's solutions also enable institutions and home caregivers to provide effective mental stimulation while actually reducing the cost of patient care. For more information, visit http://www.dakim.com.
SOURCE Dakim, Inc.
http://www.dakim.com/
Copyright (C) 2008 PR Newswire. All rights reserved
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