Alpha is a concept designed to help investors judge the performance of a mutual fund manager, individual stock, or other investment. It’s often used together with a beta, which is a measure of an investment’s volatility.
Alpha models performance on a benchmark, such as the S&P 500 Index. A real alpha of 1.0 means the fund or stock has outperformed its benchmark by 1% over the time measured. Likewise, an alpha of negative 1.0 indicates underperformance by 1%. Said another way, assume a hypothetical fund returns 10% in a given year and its benchmark gets 7% over the same time. The fund’s alpha for the year would be 3.0. (10% – 7%).
What is a good Alpha?
A real alpha of 1.0 means the fund or stock has outperformed its benchmark index by 1 percent. A related negative alpha of 1.0 would indicate an underperformance of 1 percent. A beta of fewer than 1 means that the security will be less volatile than the
Whats does alpha mean?’
Alpha refers to a dominant personality or their behavior, especially concerning socially aggressive, hyper-masculine men. Some dudebros see alpha as a compliment and aspiration. Other people see right into the small, sad, insecure hearts of the trying-too-hard alpha.
Alpha is the first letter in the Greek alphabet, its privileged position lending itself as a metaphor for primacy or superiority since at least the 1300s in English.
By the 1870s, scientists were using the term alpha man to refer to the most dominant male animal in a group—like an alpha wolf, who achieves top-dog status through dynamic response. By the 1970s, scientists extended alpha to human behavior, describing men who, through various forms of social power, acquire wealth, prestige, sexual partners, and other sources valued by their peers.
The alpha man is that type: admired in the suave cool of James Bond, parodied in the manic Patrick Bateman (Christian Bale) in the 2000 film American Psycho, feared in Daniel Day-Lewis as Daniel Plainview in 2007 There Will Be Blood, far-too-fawned-over in Brad Pitt’s Tyler Durden in the 1999 bro-classic Fight Club, and loved-and-hated in John Hamm’s Don Draper from the Mad Men TV series in the 2000s.