Alpha (Alpha coefficient)

Alpha, or Alpha coefficient, is a measure used in finance to evaluate how well an investment or portfolio performs compared to a benchmark, like a market index. It indicates the value added (or lost) by the investment manager's decisions beyond what market movements would predict. A positive alpha means the investment has outperformed the benchmark, while a negative alpha signifies underperformance. Essentially, alpha shows the skill or effectiveness of the investment strategy in generating extra returns, independent of overall market fluctuations.