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At equilibrium, what should be the value of alpha?

At equilibrium, what should be the value of alpha?

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Answer #1

At equilibrium, the value of alpha should be zero​​​​​​. This is because Alpha is referred as the abnormal rate of return on a security or portfolio in excess of what would be predicted by an equilibrium model like CAPM. And hence, at equilibrium, the value of alpha should be 0, meaning no abnormal returns.

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