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What is alpha in investing?
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19th Nov 2009 by Mark P. Cussen, CFP, CMFC
Alpha is a mathematical measurement of the amount of value that a mutual fund portfolio manager is bringing to the fund. A positive alpha means that the fund is outperforming its underlying benchmark index. For example, if a fund's underlying index is the S&P 500, and this rises by 5% in a given year, then its alpha will be positive if the fund increases by more than that percentage in value over the same time period. Alpha is ultimately a measure of a portfolio manager's ability to trade securities profitably.
Alpha is a mathematical measurement of the amount of value that a mutual fund portfolio manager is bringing to the fund. A positive alpha means that the fund is outperforming its underlying benchmark index. For example, if a fund's underlying index is the S&P 500, and this rises by 5% in a given year, then its alpha will be positive if the fund increases by more than that percentage in value over the same time period. Alpha is ultimately a measure of a portfolio manager's ability to trade securities profitably.
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19th Oct 2009 In Investing
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Subjects: alpha,