If a portfolio had an alpha of negative10 bps, then the portfolio:
A) earned 10 bps less than the market.
B) had less risk than the market.
C) earned 10 bps less than the market on a risk-adjusted basis.
Edited 1 time(s). Last edit at Tuesday, May 24, 2011 at 04:05PM by june2009.作者: Analti_Calte 时间: 2011-7-11 19:38
I think the answer is A. When you look at alpha it is the additional return over the normal benchmark.
The answer would be C if you were computing Jensen's alpha, which adjusts for the risk of the portfolio for the return of the market.作者: Darien 时间: 2011-7-11 19:38
C.
A would only apply if the beta of the portfolio = 1.作者: Zestt 时间: 2011-7-11 19:38
A all the way作者: Chuckrox 时间: 2011-7-11 19:38
C
Alpha is not an absolute return, it is a relative comparison.作者: mp3bu 时间: 2011-7-11 19:38
so whats the answer and why作者: Iginla2011 时间: 2011-7-11 19:38
A.
Edited 1 time(s). Last edit at Tuesday, May 24, 2011 at 04:39PM by Oal29.作者: Analyze_This 时间: 2011-7-11 19:38
I always thought ALPHA was excess return over some normal benchmark w/o any risk adjustment.
My portfolio earned 10%, my properly specificied benchmark earned 8% = 2% alpha. No matter the risk I undertook to get there. Is alpha not = excess return???
Will give answer in a few.作者: Windjam 时间: 2011-7-11 19:38
In theory alpha should always be on a risk-adjusted returns basis.作者: strikethree 时间: 2011-7-11 19:38
Bad question...but I see where they're going with it. Alpha is risk-adjusted excess return. In the case of Jensen's alpha, by using a specific benchmark instead of the proverbial global market, theoretically it's supposed to adjust for risk, but it depends on how you look at it.
