The process of creating investment returns that exceed what would be expected based on the portfolio's risk level, representing the value added by active management or superior investment selection beyond market performance.
From the Greek letter alpha (α) used in finance to represent excess returns above a benchmark. The concept emerged from modern portfolio theory, where alpha measures the intercept of a security's return versus the market return.
Alpha is the holy grail of investing - it's the extra return you get for being smarter than the market! Most professional fund managers fail to generate consistent alpha after fees, which is why Warren Buffett won his famous bet that index funds would outperform hedge funds over ten years.
Complete word intelligence in one call. Free tier — 50 lookups/day.