Alpha and Beta in an Exposure based Framework

Abstract:     
This paper proposes a philosophy, which generalises the concepts of alpha and beta in its various forms. We argue that in a generalised form the demarcation is actually one between commoditised and non-commoditised beta exposures. This demarcation changes as the market evolves. We further discuss the implications of this framework for active investment processes and the conceptual understanding of portable alpha strategies and risk management.

Keywords: alpha, beta, CAPM, exposure, risk, strategy, hedge funds, asset class

JEL Classifications: G10, G11, G12, G15

Working Paper Series