alpha

alpha definition - business

alpha

The mathematical estimate of the return on a security when the market return as a whole is zero. Alpha is derived from a in the formula Ri = a + bRm, which measures the return on a security (Ri) for a given return on the market (Rm) where b is beta. See also capital-asset pricing model.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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