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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 14, 2008
Teen Girl Loses Hair But Gains Support
Comtex
SAUSALITO, Calif., May 14, 2008 /PRNewswire via COMTEX News Network/ ----When Peggy Knight, of Peggy Knight Solutions, learned that a young woman was afraid to go to school because she had lost her hair and kids were teasing her, she took action. Peggy donated two of her custom-made hair pieces and invited her and her mother to the National Alopecia Areata Foundation's Annual Conference in Louisville, KY -- and raised the money to pay for it.
Brittany began losing her hair after her father's sudden illness. When students started teasing her, Brittany became depressed and thought of dropping out of high school. Now, she's a star in her school, thanks to "The Tyra Banks Show," where she met Knight. "I'm happy again!" says Brittany, because she feels confident in her custom fit hair pieces from Peggy Knight.
"I knew just how she felt," said Knight. "I lost my hair in high school and my company is the result of my need to create a place where people, especially women, could find fabulous hair solutions."
"Now the kids at school compliment me on my hair," says Brittany, a 17-year-old high-school senior. "I'm also excited about going to Kentucky, because it will be great to meet people like me. I hope to make some new friends there."
Brittany's mother, Cathy, is very happy too. "This has made a big difference in her life. She's happy at school again and I know that she'll meet other kids with Alopecia and also possibly find some solidarity and help."
Knight and Brittany hope that their appearance on "Tyra" will help increase awareness of Alopecia Areata and hair loss issues.
Peggy Knight Solutions, LLC is the leading provider of high quality hair prostheses for adults, teens and children with medical hair loss. The company is based in Sausalito, California. http://www.peggyknight.com
The National Alopecia Areata Foundation (http://www.NAAF.org) is based in San Rafael, CA, and the 23rd Annual Conference will take place from June 19 to 21 in Louisville, KY.
For more information, or an interview with Peggy Knight or Brittany, please call Michele Samuels, at 415-971-0882 or email samuelsm@pacbell.net.
SOURCE Peggy Knight Solutions, LLC
http://www.peggyknight.com
Copyright (C) 2008 PR Newswire. All rights reserved
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