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Meaning / Definition of
Alpha Equation
Categories: Stocks, Technical Analysis,
Equation used to compute the alpha of a fund. It is calculated as follows: [ (sum of y) - ((b) (sum of x)) ] / n where n equals the number of observations (36 - 60 months), b = beta of the fund, x = rate of return for the s&p 500 or another benchmark index, and y = rate of return for the fund.
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