Ads
related to: how to calculate alpha of a stockschwab.com has been visited by 100K+ users in the past month
- thinkorswim®
Access The Award-Winning Platform
Built By Traders, For Traders.
- Trader Education
Explore Our Education Library To
Get From "How?" to "Know-How."
- Schwab Investing Themes™
Invest In Ideas You Believe In -
Choose From Over 40 Themes.
- Start Trading Today
Open Your Brokerage Account With
Schwab For No Trade Minimums.
- thinkorswim®
Search results
Results from the WOW.Com Content Network
For example, if a stock fund returned 12 percent and the S&P 500 returned 10 percent, the alpha would be 2 percent. But alpha should really be used to measure return in excess of what would be ...
Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index. An alpha of 1% means the investment's return on investment over a selected period of time was 1% better than the market during that same period; a negative alpha means the investment underperformed the market.
α i is called the asset's alpha (abnormal return) β i (R M,t – R f) is a nondiversifiable or systematic risk ε i,t is the non-systematic or diversifiable, non-market or idiosyncratic risk R M,t is the return to market portfolio R f is a risk-free rate
The direct alpha formula is derived from the definition of in Modern portfolio theory. We define , the rate of return, as the sum of a market return plus an alpha : = + in the scope of direct alpha, we consider that r(t) and b(t) are continuous rate.
These equations show that the stock return is influenced by the market (beta), has a firm specific expected value (alpha) and firm-specific unexpected component (residual). Each stock's performance is in relation to the performance of a market index (such as the All Ordinaries). Security analysts often use the SIM for such functions as ...
Security market line. Security market line (SML) is the representation of the capital asset pricing model.It displays the expected rate of return of an individual security as a function of systematic, non-diversifiable risk.
Jensen's alpha is a statistic that is commonly used in empirical finance to assess the marginal return associated with unit exposure to a given strategy. Generalizing the above definition to the multifactor setting, Jensen's alpha is a measure of the marginal return associated with an additional strategy that is not explained by existing factors.
Beta is the hedge ratio of an investment with respect to the stock market. For example, to hedge out the market-risk of a stock with a market beta of 2.0, an investor would short $2,000 in the stock market for every $1,000 invested in the stock. Thus insured, movements of the overall stock market no longer influence the combined position on ...
Ads
related to: how to calculate alpha of a stockschwab.com has been visited by 100K+ users in the past month