Formulae

Question 1

What is the formula for ex-post alpha?

Answer 1

Formula for total ex-post alpha = α= i R – [Rf + ß(Rm - Rf)] i,t

R = Realized Return
Rf = Risk free rate
Rm = Realized market return / Actual market return

Question 2

What is the formula for ex-ante alpha return?

Answer 2

α i = E(R) - Rf - ß(E(Rm) - Rf) i i

Question 3

Idiosyncratic risk formula?

Answer 3

1 – R(squared)

R = correlation coefficient