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Alpha

Author

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  • Robert Faff

    (UQ Business School, University of Queensland, Australia)

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.

Suggested Citation

  • Robert Faff, 2014. "Alpha," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 13(4), pages 607-622, December.
    • Handle: RePEc:ami:journl:v:13:y:2014:i:4:p:607-622
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Alpha; Beta; empirical asset pricing; mispricing information; pricing information;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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