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


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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Alcoholic, Mallory Heidenhain's Azocarmine Stain (X400) Alpha cells, B--Beta cells
Age 55 yrs., Non-Alcoholic, Haematoxylin Phloxine Stain (X400) Alpha cells, B--Beta cells
Rat Human Number of proteins Beta Alpha Endocrine Exocrine identified n [greater than or equal to] 1 506 417 462 372 Number of proteins quantified n [greater than or equal to] 2 465 353 413 300 GEO-normalized molar amount Highest 3.61 8.22 8.95 14.74 Lowest 0.02 0.02 0.01 0.06 Dynamic range 226 548 746 246 Biological replicates (x) 3 3 4 1 Technical replicates (n) 3 3 3 3 Unfractionated protein extracts of FACS-purified pancreatic beta and alpha cells (n = 3) and FACS-enriched human islet endocrine cells (n = 4) were analyzed by alternate-scanning LC-MS/MS.
Alpha cells, on the other hand, showed relatively low counts in early postnatal period and slight gain in one week old age group.
The relative ratio of beta and alpha cells was seen to be closer to the adult ratio than in early postnatal days.
To test that hypothesis, the researchers tagged alpha cells in mice, then killed their beta cells.
"Maybe the alpha cell is the more ancestral cell type, and the beta cell is an adaptation of that cell," he says.
Alpha cells have the opposite function of beta cells.
"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.
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.
The molecule activates adult pancreatic beta and alpha cell populations.