Trading Glossary Alpha Premium industrials the market

Recommendations:

06/06/08: +108 points on the S&P 500 in 2 months

06/06/08: +47 points on the S&P 500 in 2 weeks

05/30/08: Trailing Stop

05/23/08: SBV continues to predict the trend

05/16/08: +18 on the S&P 500

05/09/08: +5% on the NASDAQ 100 in 2 weeks

05/02/08: +31 points on the S&P 500

04/25/08: +18% in 3 months

04/18/08: +6.6% on the S&P 500 in a week

04/11/08: SBV beats the market

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Trading Glossary: Alpha

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Term:

Alpha

Definition:

The premium an Investment earns above a set standard. This is usually measured in terms of the Dow Industrials or the SP 500. How the Stock performs independent of the market. Measure of risk-adjusted performance. An Alpha is usually generated by regressing the security or mutual fund`s excess Return on the S&P 500 excess return. The Beta adjusts for the Risk (the slope coefficient). The alpha is the intercept. Example: Suppose the mutual fund has a return of 25%, and the short-term Interest rate is 5% (excess return is 20%). During the same time The Market excess return is 9%. Suppose the beta of the mutual fund is 2.0 (twice as risky as the S&P 500). The expected excess return given the risk is 2 x 9%=18%. The actual excess return is 20%. Hence, the alpha is 2% or 200 Basis points. Alpha is also known as the Jensen Index. Related: Risk-adjusted return.

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Great Sites:
SPDRs-Trading-System
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7/4/2009 - SV1