Alpha

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Related to Alpha cells: insulin, Beta cells, Delta cells

Alpha

Measure of risk-adjusted performance. Some refer to the alpha as the difference between the investment return and the benchmark return. However, this does not properly adjust for risk. More appropriately, an alpha is generated by regressing the security or mutual fund's excess return on the benchmark (for example S&P 500) excess return. The beta adjusts for the risk (the slope coefficient). The alpha is the intercept. Example: Suppose the mutual fund has a return of 25%, and the short-term interest rate is 5% (excess return is 20%). During the same time the market excess return is 9%. Suppose the beta of the mutual fund is 2.0 (twice as risky as the S&P 500). The expected excess return given the risk is 2 x 9%=18%. The actual excess return is 20%. Hence, the alpha is 2% or 200 basis points. Alpha is also known as the Jensen Index. The alpha depends on the benchmark used. For example, it may be the intercept in a multifactor model that includes risk factors in addition to the S&P 500. Related: Risk-adjusted return.

Alpha

1. The measure of the performance of a portfolio after adjusting for risk. Alpha is calculated by comparing the volatility of the portfolio and comparing it to some benchmark. The alpha is the excess return of the portfolio over the benchmark. It is important to Markowitz portfolio theory and is used as a technical indicator.

2. The excess return that a portfolio makes over and above what the capital asset pricing model estimates.

alpha

The mathematical estimate of the return on a security when the market return as a whole is zero. Alpha is derived from a in the formula Ri = a + bRm which measures the return on a security (Ri) for a given return on the market (Rm) where b is beta. See also capital-asset pricing model, characteristic line.

Alpha.

Alpha measures risk-adjusted return, or the actual return an equity security provides in relation to the return you would expect based on its beta. Beta measures the security's volatility in relation to its benchmark index.

If a security's actual return is higher than its beta, the security has a positive alpha, and if the return is lower it has a negative alpha.

For example, if a stock's beta is 1.5, and its benchmark gained 2%, it would be expected to gain 3% (2% x 1.5 = 0.03, or 3%). If the stock gained 4%, it would have a positive alpha.

Alpha also refers to an analyst's estimate of a stock's potential to gain value based on the rate at which the company's earnings are growing and other fundamental indicators.

For example, if a stock is assigned an alpha of 1.15, the analyst expects a 15% price increase in a year when stock prices are generally flat. One investment strategy is to look for securities with positive alphas, which indicates they may be undervalued.

References in periodicals archive ?
The relative ratio of beta and alpha cells was seen to be closer to the adult ratio than in early postnatal days.
In the horse and Japanese serow alpha cells were found located in the centre of the islet (Atoji et al.
The number of beta cells increased rapidly in early postnatal period and outnumbered the alpha cells which got oriented at the peripheral region of the islet tissue.
Maybe the alpha cell is the more ancestral cell type, and the beta cell is an adaptation of that cell," he says.
We found that glutamate, a major signaling molecule in the brain and pancreas, is secreted together with glucagon by alpha cells and affects beta cell integrity," Dr.
It has not been typically thought that alpha cells could themselves be a cause of beta cell damage, they said.
The researchers say that the body then senses a loss of alpha cells, replaces them with new alpha cells, and then converts those too into beta cells.
The finding suggests that for people with either type 1 or type 2 diabetes, a therapeutic approach could be developed to target insulin receptors or proteins in alpha cells in order to suppress glucagon secretion.
Kulkarni said that it was thought that this increased risk was linked in some way to insulin receptors in the alpha cells, an idea that today's study suggests is in fact the case.
But, what happens in diabetes is the alpha cells become desensitized by repeated insulin injections over many years and they start to behave abnormally.