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Positive Alphas

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Although alpha represents superior performance why can't positive alphas alone guarantee a superior portfolio performance.

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Although alpha represents superior performance why can't positive alphas alone guarantee a superior portfolio performance?
The positive alphas alone cannot guarantee superior performance of the portfolio because of several reasons. You should remember that Alpha is only one of the five technical risk ratios. The others are R-squared, standard deviation, beta and the Sharpe ratio. So, depending only on one of the technical risk ratios for the entire portfolio is not advisable. It does not take other technical risk ratios into account(2). ...

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Hatim Baxamusa, MBA
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  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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