What is a good beta and alpha?
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What is a good beta and alpha?
Key Takeaways. Both alpha and beta are historical measures of past performances. A high alpha is always good. A high beta may be preferred by an investor in growth stocks but shunned by investors who seek steady returns and lower risk.
What is alpha and beta in a graph?
The angle of the line is called the slope (m) and the point where the line crosses the vertical axis is called the Y-intercept. Modern finance believes that the slope is the Beta and the Y-intercept is the Alpha.
What does a high beta mean?
A stock that swings more than the market over time has a beta above 1.0. If a stock moves less than the market, the stock’s beta is less than 1.0. High-beta stocks are supposed to be riskier but provide higher return potential; low-beta stocks pose less risk but also lower returns.
Is a negative alpha bad?
5) Negative alpha is not always bad. Additionally, alpha fails to distinguish between underperformance caused by incompetence and underperformance caused by fees. For example, index funds have negative alphas which usually reflect the drag of expenses, even when expenses are very low.
Is Low-beta good for stocks?
The lower the Beta value, the less volatility the stock or portfolio should exhibit against the benchmark. This is beneficial for investors for obvious reasons, particularly those that are close to or already in retirement, as drawdowns should be relatively limited against the benchmark.
What is a good beta in stocks?
The market as a whole has a beta of 1. Stocks with a value greater than 1 are more volatile than the market, and stocks with a beta of less than 1 have a smoother ride. Beta operates as a good comparison point to a broader index fund, but it doesn’t offer a complete portrait of a stock’s risk.
Is a negative beta good?
Negative beta: A beta less than 0, which would indicate an inverse relation to the market, is possible but highly unlikely. Some investors argue that gold and gold stocks should have negative betas because they tend to do better when the stock market declines.
Are high beta stocks good?
High beta stocks can be great investments in bull markets since they are expected to outperform the S&P 500 by a marginal amount. They do however require a great deal of active management due to their market sensitivity. These are highly volatile and therefore risky investments in isolation.
Why the current gain alpha is less than beta?
α is always less that 1.0 because of carrier generation and recombination going through the base region of the transistor, thus, the base and collector current are always less than the emitter current.
Is a high beta in stocks good?
