- Alpha
- Tool to evaluate selection risk or residual risk in a mutual fund when compared with the market. Positive alpha represents the additional return given to investors in exchange for risk, instead of settling for market return. An alpha of 0.5 shows that the fund outperformed the market return estimate by 0.5%. With regards to a Jensen Index, alpha represents a portfolio’s performance that is divergent from its beta, demonstrating the efficiency of performance of its manager.
Alpha
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