alpha

Learning outcomes: Describe the three fundamental dimensions behind risk management, and their relation to VaR and tracking error. Describe risk planning, including its objectives, effects, and the participants in its development ... Describe the objectives of performance measurement tools...

Learning objectives: Describe and evaluate the low-risk anomaly of asset returns. Define and calculate alpha, tracking error, the information ratio, and the Sharpe ratio. Explain the impact of benchmark choice on alpha and describe characteristics of an effective benchmark to measure alpha...

Hi @David Harper CFA FRM , I am very sorry that I am disturbing you as of this crucial moment. However reading more about the formula of Alpha has confused me to greater lengths than it should have. Hence I wanted a conceptual clarity on the formula of Alpha. 1. Now as I understand it we...

Hi David, Page 5 of Chapter 14: Portfolio Construction (Grinold) states the following Consider for instance, an Information Coefficient (IC) of 0.05 and a typical residual risk (volatility) of 30 percent would lead to an alpha scale of 1.5 percent (0.05 x 0.3 = 1.5%). In this case, the mean...

Learning objectives: Explain how to measure time-varying factor exposures and their use in style analysis. Describe issues that arise when measuring alphas for nonlinear strategies. Compare the volatility anomaly and beta anomaly, and analyze evidence of each anomaly. Describe potential...

Learning objectives: Describe Grinold’s fundamental law of active management, including its assumptions and limitations, and calculate the information ratio using this law. Apply a factor regression to construct a benchmark with multiple factors, measure a portfolio’s sensitivity to those...

Learning objectives: Describe and evaluate the low-risk anomaly of asset returns. Define and calculate alpha, tracking error, the information ratio, and the Sharpe ratio. Explain the impact of benchmark choice on alpha, and describe characteristics of an effective benchmark to measure alpha...

Hi @David Harper CFA FRM CIPM This is probably a trivial question. In the notes to Grinold (and in the reading itself) about Alpha scaling it states: ...the original alphas have a standard deviation of 2.00 percent and the modified alphas have a standard deviation of 0.57 percent. This...

Hi David. Could you please explain the process of Scaling and Trimming alphas (in the Topic - Grinold & Kahn. Chapter 16 - Refining Alphas - Scaling and Trimming Alpas - AIM 53.2) 1) how do i interpret this formula for scaling : Alpha = (Volatility) x (Information coefficient) x (Score)...

Dear David, I’ve had some confusion, misunderstanding and doubts when doing 09 Level I Annotated Boot Camp. Appreciate your kind help on this! I’ve noticed an important difference between you and FRM handbook with respect to calculating information ratio: in all your practice...

Hi David, I have a question A portfolio underperformed its benchmark by 2%.what can we say about alpha ? a. alpha is -2% b.alpha is definitely negative c.alpha can be positive or negative answer given is c . I can guess it to be c but can I have a more intuitive explanation from you...