Alpha
Vol. 13, Nr. 4/2014 , p607..622
Author(s):
Robert FAFF
Keywords:
Alpha; Beta; empirical asset pricing; mispricing information; pricing information
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.
Download:
http://online-cig.ase.ro/jcig/art/13_4_1.pdf
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