Question

How do you interpret the alpha and beta for the stock?

Answer 1

Alpha means the excess return generated by the asset on the investment as compared to the risk adjusted expected return on the asset.

for example: actual return on the asset is 10% while risk adjusted expected return is 8%, so in this case Alpha=10%-8%=2%

Beta is denoted as the measure of the volatility of asset which is measured in terms of asset return's sensitivity to the market or index returns.

Beta formula=(covariance of the asset and the market)/variance of the market

the above is answer..