The Alpha Portfolio

Pascal Böni () and Tim Kröncke ()
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Pascal Böni: Tilburg University
Tim Kröncke: FHNW University of Applied Sciences and Arts Northwestern Switzerland

Chapter Chapter 6 in The Evidence-Based Investor, 2025, pp 87-97 from Springer

Abstract: Abstract The alpha portfolio combines alternative asset classes and active investment strategies based on theoretical and empirical evidence.Active investing Backed by a strong rationale for economic mechanisms likely driving outperformance, the alpha portfolio improves the performance of the global market portfolio.Outperformance We emphasise that investors need to consider a potential mispricingMispricing in financial markets, and consciously think about priced but not yet considered risk factors when selecting assets for the alpha portfolio. Moreover, they must continually gather and evaluate empirical evidence on the performance of alpha opportunities. Does the observed (net of cost) performance match ex-ante expectations? The alpha portfolio is combined with the global market portfolio to achieve the highest expected return in excess of the risk-free asset, given a certain risk preference.

Keywords: alpha; outperformance; active investing; mispricing; risk factors; factor investing; alternative asset classes; private markets (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/978-3-031-88675-1_6

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