Alpha (finance)

In finance, "alpha" refers to the excess return an investment generates compared to a benchmark index, such as the S&P 500. It measures how much value a portfolio manager adds beyond the market's performance. A positive alpha indicates the investment has outperformed the benchmark, while a negative alpha suggests underperformance. Investors often look for funds with high alpha, as it implies skilled management and successful investment strategies. Essentially, alpha reflects the effectiveness of investment decisions in generating returns that exceed typical market gains.