Definition of alpha

A measure of a stock's expected return that cannot be attributed to overall market volatility. In other words, the amount the price of a stock is likely to rise or fall due to reasons specific to the company rather than due to the market as a whole. This measure is normally presented as a coefficient such as 1.15, which indicates that a stock would rise 15 per cent in the absence of any market volatility. The risk of volatility is measured by a stock's beta coefficient.