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Alpha Calculator

Alpha Calculator

This Alpha Calculator will compute the value of Alpha based on the Capital Asset Pricing Model. This CAPM-based approach will take the Portfolio Return, Risk Free Rate, Beta and Market Return and calculate Alpha from these elements:

Here is a snippet of the template Calculator:

 

Alpha Calculator

 

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Alpha Calculator

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Capital Assets Pricing Model (CAPM)

The CAPM formula is expressed as follows:

 

r = Rf + beta (RmRf) + Alpha

 

Therefore,

 

Alpha= R – Rf – beta (Rm-Rf)

 

Where:

R represents the portfolio return

Rf represents the risk-free rate of return

Beta represents the systemic risk of a portfolio

Rm represents the market return

 

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