Why do we call alpha a “nonmarket” return premium? Why are high-alpha stocks desirable investments for active portfolio managers? With all other parameters held fixed, what would hap-pen to a portfolio’s Sharpe ratio as the alpha of its component securities increased?

Why do we call alpha a “nonmarket” return premium? Why are high-alpha stocks desirable investments for active portfolio managers? With all other parameters held fixed, what would hap-pen to a portfolio’s Sharpe ratio as the alpha of its component securities increased?

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter6: Risk And Return

Section: Chapter Questions

Problem 12MC: Calculate the correlation coefficient between Blandy and the market. Use this and the previously...

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Why do we call alpha a “nonmarket” return premium? Why are high-alpha stocks desirable investments for active portfolio managers? With all other parameters held fixed, what would hap-
pen to a portfolio’s Sharpe ratio as the alpha of its component securities increased?

Definition Definition Act of managing the funds of another individual, company, or institution to maximize their wealth within a given time. Portfolio management helps to achieve financial objectives by reducing the risk of loss.

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