# 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

What is Alpha?

Alpha measures a mutual fund manager’s or strategy's effectiveness. It shows the difference between a fund's actual returns and its expected performance, given its level of risk as measured by beta. 

Alpha gauges how well a manager can pick stocks. It takes the fund’s return and subtracts the return expected from its beta to uncover any excess. A positive alpha indicates the fund has performed better than its beta would predict. In contrast, a negative alpha means the fund performed worse than expected given its beta.

Alpha is also after fees, meaning the fund must overcome its management fees as well as its beta to have positive alpha. 

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