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I'm probably showing my ignorance here but what do you mean by alpha? And how is it quantified?


Alpha is how much excess return you had over the market (or risk free return(

E.g. if you made 10% when overall market was up 15% for the year, you have negative alpha. [As someone could have bought index and held it through year to generate better return]

If you made 20% when market was up 10%, you have positive alpha.

That is why everyone in the investment community is 'seeking alpha'.




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