excess return

Alpha is a measure of the so-called active return on an investment, the performance of that investment compared to a suitable market index. An alpha of 1 means the investment's return on investment over a selected period of time was 1 etter than the market during that same period, an alpha of -1 means the investment underperformed the market. Alpha is one of the five key measures in modern portfolio theory: alpha, beta, standard deviation, R-squared and the Sharpe ratio.