Alpha
 |
|---|
Alpha is a measure of return.
Alpha is a measure of a portfolio's return in excess of the market return, after both have been adjusted for risk.[1]
It represents the value a manager adds to the performance of the portfolio over the market.[2] Alpha purposely does not take into account pure market performance or the particular risk level of the strategy. Rather, it offers an indicator of the manager's skill due to his/her ability to provide value-added returns to the strategy for clients -- rather than, for example, simply participating in a bull market.[3]
For example, if a fund had an alpha of 1.0 during a given month, it would have produced a return during that month that was one percentage point higher than the benchmark Treasury. Alpha can also be used as a measure of residual risk, relative to the market in which a fund participates.[4]
Resources
References
- ↑ Alpha. Russell.com.
- ↑ Alpha-Beta: Separation, Transportation and Recombination. PIMCO.
- ↑ "Hedge fund terms”. Liberty Gateway.
- ↑ "Hedge Fund Glossary ”. Hedge Fund Lounge.
