Can be used to calculate the alpha coefficient: the alpha coefficient (α) is the difference between the actual return of the fund and the expected return calculated according to the beta coefficient (β). Its calculation method is as follows: the excess return is the income of the fund MINUS the income of risk-free investment (in China, it is the income of one-year bank time deposit); Expected return is the product of β coefficient and market return, which reflects the income of the fund due to the overall changes in the market; The difference between the excess return and the expected return is the α coefficient.
The so-called normal profit refers to the minimum profit level necessary for manufacturers to continue to engage in certain production and business activities, that is, the profit level when the total income equals the total cost. When a manufacturer adopts new technology before others, or has some market power, or for other reasons, the cost is lower than other manufacturers or the product price is higher than other manufacturers, it may obtain higher than normal profits, that is, it may obtain excess profits. Excess profit can only exist for a short time in competitive industries, but it may exist in both short-term and long-term in monopolistic industries.
Sources of excess profits
The excess profit obtained in this way is the shortest and the most unstable. In a freely competitive market, the relationship between supply and demand will automatically adjust. When there is excess profit, other competitors will join quickly, the balance between supply and demand will soon return to normal, and the excess profit will disappear. This acquisition of excess profits is very fragile and unsustainable. The production capacity of competitors has greatly expanded, and the emergence of the inflection point of the boom has made the excess profits disappear rapidly and may cause losses.
The cost is ahead of other enterprises, and the low cost is more stable than the excess profit obtained by the shortage. The cost-leading strategy relies more on excellent enterprise management, which has high requirements on the scale, management, system and cost control of enterprises.
The monopoly, goodwill and exclusiveness of franchising have established strong barriers, kept new competitors out of the industry and formed a huge competitive advantage in the industry, which is difficult for the industry to surpass.