What does alpha mean on a stock?

The alpha figure for a stock is represented as a single number, like 3 or -5. However, the number actually indicates the percentage above or below a benchmark index that the stock or fund price achieved. In this case, the stock or fund did 3% better and 5% worse, respectively, than the index.

What does an alpha of 1 mean?

An alpha of one (the baseline value is zero) shows that the return on the investment during a specified time frame outperformed the overall market average by 1%. Corporate Finance Institute Menu All Courses Certification Programs Compare Certifications FMVA®Financial Modeling & Valuation Analyst CBCA®Commercial Banking & Credit Analyst

How is alpha value calculated?

The alpha value is calculated and compared to a benchmark that is deemed appropriate for the portfolio. Investors should select a relevant benchmark. The most frequently used benchmark index is the S&P 500 stock index. However, some portfolios, such as sector funds, may require using a different index in order to have an accurate comparison.

Which phonetic alphabet starts a as in Alfa?

The most commonly used, internationally recognized, phonetic alphabet is NATO, which begins “A as in Alfa”. This alphabet has remained stable since 1956. Martin holds a Master’s degree in Finance and International Business.