Alpha - Measure of risk adjusted performance. An alpha is usually generated by regressing the security or mutual funds excess return on the S&P 500 excess return. The beta adjusts for the risk (the slope coefficient). The alpha is the intercept. Example: Suppose the mutual fund has a return of 23% and the short-term interest rate is 5% (excess return is 20%). During the same time the market excess return is 9%. Suppose the beta of the mutual fund is 2.0 (twice as risky as the S&P 500). The expected return given the risk is 2x9%=18%. The actual excess return is 20%. Hence, the alpha is 2% or 200 basis points. Alpha is also know as Jensen Index. Related: Risk adjusted return.
1. A measure of risk, used for mutual funds with regards to their relation and the market. A positive alpha is the extra return awarded to the investor for taking a risk, instead of accepting the market return.
Alpha is the term used to describe the risk adjusted outperformance of an investment. A large alpha indicates good performance relative to the market.
The relationship which the return on a stock has with the return on the market as a whole, often described a "stock-specific return".Stocks which rise when the market as a whole is falling have "positive alphas".Stocks which fall when the market as a whole is rising have "negative alphas".
Alpha : measure of risk adjusted performance. an alpha is usually generated by regressing the security or mutual funds excess return on the s&p 500 excess return. the beta adjusts for the risk (the slope coefficient). the alpha is the intercept. example: suppose the mutual fund has a return of 23% and the short-term interest rate is 5% (excess return is 20%). during the same time the market excess return is 9%. suppose the beta of the mutual fund is 2.0 (twice as risky as the s&p 500). the expected return given the risk is 2x9%=18%. the actual excess return is 20%. hence, the alpha is 2% or 200 basis points. alpha is also know as jensen index. related: risk adjusted return.
1. a measure of risk, used for mutual funds with regards to their relation and the market. a positive alpha is the extra return awarded to the investor for taking a risk, instead of accepting the market return.
alpha is the term used to describe the risk adjusted outperformance of an investment. a large alpha indicates good performance relative to the market.
the relationship which the return on a stock has with the return on the market as a whole, often described a "stock-specific return".stocks which rise when the market as a whole is falling have "positive alphas".stocks which fall when the market as a whole is rising have "negative alphas".
Alpha