A positive alpha is an indication of:
A)low risk.
B)high risk.
C)superior performance.
D)low diversification.

Question

Quizplus · Accepted Answer

A positive alpha indicates that the fund has outperformed its benchmark or the market. Therefore, choice C - superior performance, is the best answer. A low or negative alpha indicates that the fund has underperformed the benchmark or the market. It does not directly indicate low or high risk, although a high alpha might imply that the fund takes more risk than its benchmark. Similarly, it does not indicate low diversification as the alpha only measures performance relative to the benchmark.

A Positive Alpha Is an Indication Of