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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 12, 2008
Providence Holy Cross Medical Center Ignores Community, Environmental Concerns With Planned Expansion of Mission Hills Facility
Comtex
LOS ANGELES, May 12, 2008 /PRNewswire-USNewswire via COMTEX News Network/ ----Providence Holy Cross Medical Center (PHCMC) today went ahead with the planned expansion of its Holy Cross Medical Center even as Superior Court Judge Thomas I. McKnew, Jr. has upheld charges that the approval process was significantly flawed. The groundbreaking ceremony held today appears to be an attempt to create "facts-on-the-ground" that would complicate a likely requirement for Providence to complete an Environmental Impact Review before the project is properly approved.
The Community Advocates for a Responsible Expansion (CARE) Coalition, a group of community, church and environmental groups from the San Fernando Valley, has been engaged in the process to ensure that PHCMC's irresponsible actions do not result in significant unmitigated environmental impacts. "We're for the expansion but we can't support the proposal until they do an environmental mitigation," said CARE Coalition member Wayde Hunter.
The hospital is breaking ground even though an 8-5 majority of the City Council voted in November to require an Environmental Impact Report. Judge McKnew has already rejected the hospital's argument that the City was free to consider this vote an approval of the hospital's expansion because of a rule in the City's municipal code requiring a two-thirds vote of the City Council to uphold environmental appeals. The litigation is likely to result in overturning the hospital's permission to go forward as well as the City's rules for handling environmental appeals.
Los Angeles City Councilman Richard Alarcon, whose district includes the Mission Hills area where the hospital is located, continues to lead efforts to ensure PHCMC respects the local community's concerns in regards to the hospital expansion. Said Councilman Alarcon, "I am disappointed that Holy Cross has decided to move forward with construction, not withstanding the pending case and particularly statements by Judge McKnew that are favorable to the CARE Coalition's position. My goal has always been protecting the environment and quality of life in the surrounding community. Holy Cross should have waited for the outcome of the pending case before breaking ground."
CARE's repeated attempts to raise their concerns with PHCMC have been met by a media and legal campaign designed to hold the huge health care provider unaccountable to community input. Said Hunter, "We're angered that Holy Cross is doing this, I think it reflects their total disregard for the community. I've never dealt with anyone as intractable as this company." Regardless of today's development, however, the Coalition will continue with their efforts to bring the approval process into compliance with CEQA guidelines.
Media Availability: Wayde Hunter, President of the North Valley Coalition of Concerned Citizens, and CARE Coalition member, will be available for press requests. He can be reached at 818.363.3597.
SOURCE Community Advocates for Responsible Expansion
Copyright (C) 2008 PR Newswire. All rights reserved
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