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    Alpha Hunters and Beta Grazers

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    Paul Bennett
    This document discusses alpha hunters and beta gazers in investment and portfolio analysis. It defines alpha as excess return that lets investment managers beat the market, while beta is the linear return from the market. Alpha hunters actively seek investment opportunities from both acute and chronic market inefficiencies. Acute inefficiencies are short-term while chronic inefficiencies are more persistent. Beta gazers take a passive approach focused on market beta and the efficient market hypothesis that average market prices are correct over the long term.

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    Alpha Hunters and Beta Grazers

    Uploaded by

    Paul Bennett
    51 views3 pages
    This document discusses alpha hunters and beta gazers in investment and portfolio analysis. It defines alpha as excess return that lets investment managers beat the market, while beta is the linear return from the market. Alpha hunters actively seek investment opportunities from both acute and chronic market inefficiencies. Acute inefficiencies are short-term while chronic inefficiencies are more persistent. Beta gazers take a passive approach focused on market beta and the efficient market hypothesis that average market prices are correct over the long term.

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    investment and portfolio analysis

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    Alpha hunters and Beta grazers

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    This document discusses alpha hunters and beta gazers in investment and portfolio analysis. It defines alpha as excess return that lets investment managers beat the market, while beta is the linear return from the market. Alpha hunters actively seek investment opportunities from both acute and chronic market inefficiencies. Acute inefficiencies are short-term while chronic inefficiencies are more persistent. Beta gazers take a passive approach focused on market beta and the efficient market hypothesis that average market prices are correct over the long term.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    51 views3 pages

    Alpha Hunters and Beta Grazers

    Uploaded by

    Paul Bennett
    This document discusses alpha hunters and beta gazers in investment and portfolio analysis. It defines alpha as excess return that lets investment managers beat the market, while beta is the linear return from the market. Alpha hunters actively seek investment opportunities from both acute and chronic market inefficiencies. Acute inefficiencies are short-term while chronic inefficiencies are more persistent. Beta gazers take a passive approach focused on market beta and the efficient market hypothesis that average market prices are correct over the long term.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    ALPHA HUNTERS AND BETA GAZERS

    Investment and portfolio analysis

    Group Members:
    Mahnoor Iftikhar
    Rabbia Shahid
    Saad khwaja

    Financial analysis
    Alpha is excess return that lets the investment manager beat the market. For most investors,
    Alpha and Beta are inseparable. When you buy an active mutual fund, for instance, youre
    buying a lot of Beta and a little bit of Alpha. The most sophisticated investors are now
    decoupling the two, separating their decisions about Alpha from their decisions about Beta. This
    new investing technique allows investors to gain increased control over their asset allocation
    strategies, control costs andmost importantlymaximize returns.
    Alpha hunters: Alpha hunters are active investment.
    Two types of alphas are:

    Allocation Alphas are broadly available and are more balanced Return- Risk structure.

    They are distinct in nature.


    Truly active skill based return enhancements derived from opportunist inefficiencies.
    Both alphas offer the potential for enhanced return and they can be combined to create
    exceptional opportunities.

    Alphas coming from Acute inefficiencies are easy to identify , are short term in nature and can
    be arbitrage away.
    Chronic inefficiencies are difficult to identify, more ambiguous and persistent. They arise
    because of structural or behavioral inefficiencies such as imbalance in capital flows.
    Inefficiencies occur when investors focus too much on outcome and fail to avaluate the
    investment process especially when outcome was positive.
    Beta Gazers are passive investment and are efficiency based. Beta is the linear return from
    market and alpha is the non-market related component of the return of an individual security or
    portfolio. Beta is the relationship between the returns from an investment and the risk associated
    with those returns. More-risky assets should have an associated risk premiumthe likelihood of
    higher returns. Any given universe of investments, then, can be seen to have its own Beta, and
    true manager skill should only be assessed once that Beta is understood.

    The Efficient Market Hypothesis (EMH) tells us that the market is, over the long term, efficient:
    Any one managers gain is anothers loss, and on average, the market price is the right price.

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