Answered By: Barbara Coffey
Last Updated: Sep 24, 2019     Views: 12

 

In finance, Alpha is the return on an investment relative to an index. 

 

If the stock or portfolio returned 10% and the S&P or other benchmark index returned 5% then alpha would be 5%. 

 

Alpha = Realized return – (Risk free rate + Beta(Market Return – Risk Free Rater)

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