Is Alpha Dead?

Advisor Perspectives, April 5, 2011

6 Pages Posted: 4 Apr 2011 Last revised: 6 Jul 2012

Date Written: March 31, 2011


We are said to live in an “Alpha-centric” world, in which investors supposedly focus on “Alpha”. This demand is met by active investment managers – “Alpha hunters”. This note does presents two conceptual arguments why Alpha does not automatically result in superior risk-adjusted returns and is not a suitable performance metric except for investors with an unlimited appetite for leverage. We also discuss why Alpha values estimated by performance analysts are prone to be distorted by specification errors. While Beta has been declared dead several times in the past, Alpha seems to be a survivor. The diagnosis implicit in this note is that Alpha is in a very critical condition in the most optimistic interpretation of the arguments.

Keywords: Alpha Index, Factor Model, Portfolio Risk, Adjusted Performance Measure

Suggested Citation

Steiner, Andreas, Is Alpha Dead? (March 31, 2011). Advisor Perspectives, April 5, 2011, Available at SSRN: or

Andreas Steiner (Contact Author)

Andreas Steiner Consulting GmbH ( email )

Walderstrasse 43c
Hinwil, 8340


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