What is the definition of alpha investments?

In investing, the definition of alpha is the excess or abnormal rate of return of an investment. A simple alpha calculation can be completed by subtracting the total return of an investment from a benchmark that is comparable in the same asset class.

Is negative alpha a signal to sell an investment?

Negative alpha means the investment isn’t meeting expectations or lags behind market returns. For example, alpha of +5 can indicate that a stock is more likely to produce a higher return on investment than the securities it’s benchmarked against. Conversely, alpha of -5 suggests the stock isn’t performing at a standard level.

What does alpha mean in finance?

Alpha is the excess return on an investment after adjusting for market-related volatility and random fluctuations. Alpha is one of the five major risk management indicators for mutual funds,...

What is Alpha Investment Management?

Simply stated, alpha is used to measure performance on a risk adjusted basis. As an investor we want to know if we are being compensated for the risk taken in our investment, and alpha helps assess whether or not an investment is worth investing in. Alpha is presented as a numerical value.