To find alpha, first define it

James Dunn | PortfolioConstruction Forum | 04 June 2013

 

Everyone knows what alpha is - right? How many times have you had a fund manager BDM sitting in your office, telling you that their funds have delivered alpha, in that they beat the market benchmark for that asset class?

This is one of the most common misconceptions in the investment industry. Even experienced practitioners fall into the trap of talking about alpha as being purely outperformance.

But actually, that's incorrect. Alpha is risk-adjusted outper...

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