α stands for α and β stands for β. Alpha coefficient refers to the difference between the absolute return of investment or fund and the expected risk return calculated according to beta coefficient. Simply put, the most common meaning of alpha coefficient is excess return, and beta coefficient is a risk index used to measure the price fluctuation of individual stocks or stock funds relative to the whole stock market.

Application of α and β

Market income is the money earned under market conditions. Bull market is easier to make money and bear market is easier to lose money, which is related to the beta coefficient β of this fund. The greater the beta coefficient, the more vulnerable it is to market fluctuations. In practical application, we can choose a fund with a large beta coefficient when the market is at the bottom. Once the market starts to rise,

This fund can show a faster upward trend. When the market is high, you can choose a fund with a smaller beta coefficient. When the market falls, it can show stronger resilience and excess returns, that is, the income that the fund manager's professional ability can obtain. The bigger the alpha, the stronger the fund manager's ability to make money.