Alpha

Robert Faff

Journal of Accounting and Management Information Systems, 2014, vol. 13, issue 4, 607-622

Abstract: “Alpha” has symbolic importance on the investments side of finance. That is, a fundamental pillar of modern finance theory is the risk-return relation, and traditionally alpha is taken to represent the degree of “mispricing” in asset returns. But, such an interpretation is not always appropriate – seemingly paradoxically, for certain specific setups alpha embodies pricing information. In this paper, I explain and illustrate the distinguishing circumstances between these two diametrically opposed cases.

Keywords: Alpha; Beta; empirical asset pricing; mispricing information; pricing information (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:ami:journl:v:13:y:2014:i:4:p:607-622

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