Calculating Alpha: Intercept & K

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In summary, the conversation discusses how to calculate alpha using the intercept and the value of k. The relevant equation is T= 2pi*(m+(alpha)mspring)/k)^1/2, and the intercept is found to be .228 and k=5kg/s^2. The individual is unsure how to incorporate the intercept into the equation and how it relates to the graph. They also mention using Hooke's law and defining alpha.
  • #1
nothingatall
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Homework Statement


calculate alpha using the intercept and the value of k.

Homework Equations


T= 2pi*(m+(alpha)mspring)/k)^1/2

The Attempt at a Solution


my intercept i found using EXCEL was .228 and k=5kg/s^2 which I'm pretty sure i did wrong. But i don't know how my intercept would have anything to do with this. and where to plug the intercept into. My slope turned out to be S^2/ g when i was asked to graph T^2/ g. A little help? thanks
 
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  • #2
What are your x and y axes? Can you attach the graph? Which one of Hooke's laws is relevant? Define alpha.
 

1. What is the formula for calculating alpha?

The formula for calculating alpha is: Alpha = Intercept + K * Market Return, where Intercept is the constant term and K is the coefficient of the market return.

2. How do you interpret the alpha value?

The alpha value indicates the excess return of a portfolio or investment compared to its benchmark index. A positive alpha value suggests that the portfolio outperformed the benchmark, while a negative alpha value suggests underperformance.

3. What is the significance of the intercept term in the alpha formula?

The intercept term represents the expected return of the portfolio when the market return is zero. It takes into account the performance of the portfolio independent of the market and reflects the manager's skill in selecting investments.

4. How do you calculate the K coefficient?

The K coefficient is calculated by dividing the covariance of the portfolio's returns with the market returns by the variance of the market returns. In other words, it measures the portfolio's sensitivity to the market.

5. Can alpha be used as the sole measure of a portfolio's performance?

No, alpha should not be used as the sole measure of a portfolio's performance. It should be considered along with other measures such as beta, standard deviation, and Sharpe ratio to get a comprehensive understanding of the portfolio's risk and return.

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