Why is alpha sometimes : (expected - rfr)/stnd dev and other times it is: (expected - capm)/stnd dev Any advice on when to use each. In TB model it is (expected-capm)/stnd dev so when to use the other??
where did std dev makes its way into alpha? the two alphas I know of: 1. Ex Ante Alpha = Required Return - expected Return 2. Ex Post Alpha = Required Return - contemporaneous return from like stocks/assets
Sorry…mixing up sharpe ratio and alpha. Seeking sharpe guidance… Sharpe = alpha/stnd dev but isnt the alpha different in certain computations?
sharpe ratio measures excess return per unit of risk. excess return depends on the benchmark you use (ie return on S&P, security’s required return, or riskfree rate) hence the reason why alpha varies.