You're here:  Home --> Dictionary --> A --> Alpha

Beta
Excess Return
CAPM
Risk-free rate

Alpha
Term category: Stocks
In 10 words or less: A security's abnormal rate of return, as used in CAPM.

Definition: Alpha refers to the abnormal rate of return for a security than what would be predicted using the Capital Asset Pricing Model (CAPM).

StockJargon Advice: When using CAPM, investors prefer to invest in companies that have positive alphas.  These are stocks that earn returns in excess of what is predicted based on the level of risk for the investment.  Negative alphas mean that the risks outweigh the return you would gain from the investment.

Related Articles

Capital Asset Pricing Model
Learn how to use this model to determine what a stock is approximately worth...

Stock Quotes
Ever wondered how you read a stock quote? This article explains the information you find in them…

The Broker
Before you start investing, you have to find the right broker (online or traditional).

Related Books

CAPM by Joseph Phillips
Professional Stock Trading by Mark Conway
My Life as a Quant by Emanuel Derman
The Five Rules for Successful Stock Investing by Pat Dorsey

# -A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z