What is formula of alpha minus beta?

What is formula of alpha minus beta?

answered Nov 1, 2017 by priya12 Expert (74.9k points) 1) By algebraic identity, (a-b)² = (a+b)² – 4ab. 2) Using this, (α – β)² = (α + β)² – 4αβ 3) This shows that α – β = √(α + β)² – 4αβ

How do you calculate Alpha Beta?

Explanation:

1. If the quadratic equation ax2+bx+c=0 , has roots αandβ, then α+β=−baandα⋅β=ca. Here,
2. x2−22x+105=0⇒a=1,b=−22,c=105.
3. So, α+β=−−221=22,andαβ=1051=105. Now, (α−β)=√(α+β)2−4αβ ,… where,(α>β)
4. (α−β)=√(22)2−4(105)
5. (α−β)=√484−420=√64=8.

How do you calculate alpha and beta of a fund?

Calculation of alpha and beta in mutual funds

1. Fund return = Risk free rate + Beta X (Benchmark return – risk free rate)
2. Beta = (Fund return – Risk free rate) ÷ (Benchmark return – Risk free rate)
3. Fund return = Risk free rate + Beta X (Benchmark return – risk free rate) + Alpha.

What is value of alpha and beta?

Alpha shows how well (or badly) a stock has performed in comparison to a benchmark index. Beta indicates how volatile a stock’s price has been in comparison to the market as a whole. A high alpha is always good.

What is cos alpha minus beta?

The expansion of cos (α – β) is generally called subtraction formulae. We are suppose to prove that, cos (α – β) = cos α cos β + sin α sin β. Construction: On the bounding line of the compound angle (α – β) take a point A on OZ and draw AB and AC perpendiculars to OX and OY respectively.

What is alpha minus beta?

α – β = √(α + β)² – 4αβ

How is alpha calculated?

Alpha is an index which is used for determining the highest possible return with respect to the least amount of the risk and according to the formula, alpha is calculated by subtracting the risk-free rate of the return from the market return and multiplying the resultant with the systematic risk of the portfolio …

What is Alpha Beta value?

alpha. beta = c/a = 1/5 , Answer.

What is negative alpha in mutual fund?

In portfolio management, a negative alpha indicates that your investments aren’t optimally diversified. For a mutual fund manager or an overall strategy, alpha can indicate the overall effectiveness of the fund or the strategy. In addition, alpha can also gauge how well a manager can pick stocks.

What is the formula of Alpha?

Alpha = R – Rf – beta (Rm-Rf) R represents the portfolio return. Rf represents the risk-free rate of return. Beta represents the systematic risk of a portfolio. Rm represents the market return, per a benchmark.

How do you calculate Alpha from beta and return?

For example, assuming that the actual return of the fund is 30, the risk-free rate is 8%, beta is 1.1, and the benchmark index return is 20%, alpha is calculated as: Alpha = (0.30-0.08) – 1.1 (0.20-0.08) = 0.

How do you calculate the Alpha of a mutual fund?

For example, assuming that the actual return of the fund is 30, the risk-free rate is 8%, beta is 1.1, and the benchmark index return is 20%, alpha is calculated as: Alpha = (0.30-0.08) – 1.1 (0.20-0.08) = 0. 088 or 8.8%. The result shows that the investment in this example outperformed the benchmark index by 8.8%.

What is the difference between alpha and beta in investing?

1 Alpha and beta are two different parts of an equation used to explain the performance of stocks and investment funds. 2 Beta is a measure of volatility relative to a benchmark, such as the S&P 500. 3 Alpha is the excess return on an investment after adjusting for market-related volatility and random fluctuations.

How do you calculate the beta value of a stock?

If any of the value is in negative that will leads to a value of beta as negative which means loss. It is the stock’s rate of return minus risk free rate. It is the market’s rate of return minus risk free rate. Divide return on risk is taken on the stock by return on risk taken on the market- This will provide you value for Beta.