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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 05, 2008
SDSU Study Reveals Eating at Friends and Family's Puts Kids at Higher Risk for Obesity
Comtex
SAN DIEGO, May 5, 2008 /PRNewswire via COMTEX News Network/ ----More time spent eating away from home could put kids at higher risk for obesity, according to a San Diego State University study published in this month's research journal "Obesity."
SDSU public health researcher Guadalupe X. Ayala has found that consuming foods at the home of relatives, neighbors or friends once a week or more is associated with a higher risk of obesity in children.
Youngsters who ate away from home often drank more sugar-sweetened beverages and ate more sweet and savory snacks, such as chips and ice cream.
This research is the first to consider settings outside the home, apart from restaurants, as potential risk factors for childhood obesity. Ayala also found that eating at restaurants weekly or more often not only increased the child's risk of obesity, but the parents' as well.
The study focused on children in kindergarten through 2nd grade from 13 Southern California elementary schools. Ayala said that Latino children may be at particular risk because their culture is more family-oriented.
"Latinos appear to rely on friends and family for support and childcare more than other cultures do," Ayala said.
She recommended parents discuss their children's health risks with friends and family members who may serve as secondary caretakers.
"Encourage the caretakers to reinforce at-home food rules and to negotiate what food is available to your child," Ayala said.
The research was done in conjunction with SDSU's Graduate School for Public Health and the San Diego Center for Prevention Research. The San Diego Prevention Research Center is an interdisciplinary academic-community partnership committed to conducting research and education to promote physical activity and improve the health of Latino populations. The research center seeks to translate research into practices that are meaningful to Latino communities and that can be sustained through formal and informal community networks.
SDSU is the oldest and largest institution of higher education in the San Diego region. Founded in 1897, SDSU offers bachelor's degrees in 81 areas, master's degrees in 74 and doctorates in 16. SDSU's approximately 34,000 students participate in academic curricula distinguished by direct faculty contact and an increasingly international emphasis that prepares them for a global future. For more information, visit http://www.sdsu.edu
Contact: Gina Speciale San Diego State University (619) 594-4563 office; (619) 813-3581 cell speciale@mail.sdsu.edu
SOURCE San Diego State University
http://www.sdsu.edu
Copyright (C) 2008 PR Newswire. All rights reserved
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