Glossary
Liquidity: An asset’s ability to be easily converted through an act of buying or selling without causing a significant movement in the price and with minimum loss of value.
Alpha: The measurement of the difference between a portfolio’s actual returns and its expected returns given its risk level as measured by its beta. A higher alpha is better, but a high alpha is only reliable in the presence of a high R-squared value. It can be viewed as a risk-adjusted measure of return. Some advisors see alpha as a measurement of the value added or subtracted by a fund’s manager. A positive alpha figure indicates the portfolio has performed better than its beta would predict. A negative alpha figure indicates a portfolio has underperformed, given the expectations established by the fund’s beta.
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