Business Glossary

1. coefficient measuring the portion of an investment's return arising from specific (nonmarket) risk. In other words, alpha is a mathematical estimate of the amount of return expected from an investment's inherent values, such as the rate of growth in earnings per share. It is distinct from the amount of return caused by volatility , which is measured by the beta coefficient. For example, an alpha of 1.25 indicates that a stock is projected to rise 25% in price in a year when the return on the market and the stock's beta are both zero. An investment whose price is low relative to its alpha is undervalued and considered a good selection.
   In the case of a mutual fund , or other portfolio, alpha measures the relationship between the portfolio's performance and its beta over a three-year period, and can be viewed as a measure of the value added by the manager.
2. on the London Stock Exchange, alpha stocks were the largest and most actively traded companies in a classification system that was adopted after the big bang in October 1986 and was replaced in January 1991 with the Normal Market Size (NMS) classification system.

measurement of returns from an investment apart from market returns. Represents the amount of return expected from fundamental causes such as the growth rate in earnings per share; contrast with beta , which is a measure of volatility.

1. expected price performance of a stock attributable to earnings, management, or other factors, as opposed to general market conditions. A stock with an alpha of 1.10 can be expected to outperform the market regardless of what happens to the market as a whole.
2. risk-adjusted rate of returnof a mutual fund. Alpha measures the portfolio manager's contribution to investment return. A mutual fund with an alpha of 2.0% would have performed 2.0% better than expected for funds in its category. See also beta .

a fast 64-bit microprocessor originally made by Digital Equipment Corporation, which has now merged with Compaq. Alpha-based computers usually run UNIX. The Alpha can also emulate a 386 to run PC software.