In a time series regression of the excess return of a mutual fund on a constant and the excess return on a market index, which of the following statements should be true for the fund manager to be considered to have "beaten the market" in a statistical sense?
A) The estimate for $\alpha$should be positive and statistically significant
B) The estimate for $\alpha$ should be positive and statistically significantly greater than the risk-free rate of return
C) The estimate for $\beta$ should be positive and statistically significant
D) The estimate for $\alpha$ should be negative and statistically significant.

Question

Quizplus · Accepted Answer

The estimate for the alpha (α) in a regression of excess returns on a constant and the excess return on a market index being positive and statistically significant indicates that the fund manager has achieved returns above what would be expected given the market's performance, thus "beating the market."

In a Time Series Regression of the Excess Return of a Mutual