What is alpha & beta?

He is a CFA Charterholder and previously worked in equity research at a buyside investment firm. Baker is passionate about helping people make sense of complicated financial topics so that they can better plan for their financial futures. Alpha and beta are measurements used to assess the performance of a stock or other investment.

What is the difference between alpha and beta?

Alpha is a way to measure excess return, while beta is used to measure the volatility, or risk, of an asset. Beta might also be referred to as the return you can earn by passively owning the market. You can’t earn alpha by investing in a benchmark index fund such as an S&P 500 index fund, which is the definition of beta.

What does beta mean in finance?

Beta is a measure of market risk, and alpha expresses whether the returns of an investment exceed the returns that its beta would predict. What Is Beta In Finance? An investment's beta, or the beta coefficient, is statistical measure of the volatility of a certain investment's returns referenced against the market as a whole.