The Success of Alpha
| Aug 28th, 2006 | Filed under: CAPM / Alpha Theory | By: Alpha Male |
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By: Europerformance
This article from the website of Europerformance (a European mutual fund ratings agency) argues
a) that alpha is not the sole domain of hedge fund managers (Alpha Male agrees)
b) that advisors need to adopt alpha as a key measure along with return and volatility (Alpha Male agrees), and,
c) that Sharpe’s style analysis should be used to define a custom benchmark for each manager (Alpha Male thinks this is somewhat (oxy)moronic – see comments below).
Excerpts:
“Alpha continues to give rise to debate in the financial community…The debate is generally monopolised by alternative managers who have made this issue a distinguishing mark of their management…It is nevertheless quite surprising that one associates alternative management with alpha and yet none of the data providers calculates or publishes alphas for alternative management. The delivery of an absolute return in no way guarantees that the management generates alpha.
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