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→The love-hate relationship between Alpha and Vega
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[[Alpha]], on the other hand, really is special, since QED only a certain portion of the market can generate it. Because it's an expression of variance from a mean, for every whizz-kid who generates [[positive alpha]], someone's generating an equivalent amount of [[negative alpha]] (i.e., returns than are ''worse'' than [[beta]]). | [[Alpha]], on the other hand, really is special, since QED only a certain portion of the market can generate it. Because it's an expression of variance from a mean, for every whizz-kid who generates [[positive alpha]], someone's generating an equivalent amount of [[negative alpha]] (i.e., returns than are ''worse'' than [[beta]]). | ||
Why you should run for the hills when you see a product called | ===Why you should run for the hills when you see a product called [[leveraged alpha]]=== | ||
"[[Alpha]]" was a far more credible label when {{tag|hedge fund}}s were a small segment of the market comprising the crème de la crème of the city's trading talent - the Soroses and GLGs of the world, who really could outperform the rest of the market. If someone is incautious enough to claim they're generating leveraged alpha, they're either so stupid as to admit they're really just gearing the whoopsie out of your investment (if it goes wrong, guess who loses?), or they think you're so stupid you won't understand that. And quite possibly both. | "[[Alpha]]" was a far more credible label when {{tag|hedge fund}}s were a small segment of the market comprising the crème de la crème of the city's trading talent - the Soroses and GLGs of the world, who really could outperform the rest of the market. If someone is incautious enough to claim they're generating leveraged alpha, they're either so stupid as to admit they're really just gearing the whoopsie out of your investment (if it goes wrong, guess who loses?), or they think you're so stupid you won't understand that. And quite possibly both. | ||
Beware of {{c|Greeks}} bearing [[leverage]]. | Beware of {{c|Greeks}} bearing [[leverage]]. | ||