Question: Why do we call alpha a nonmarket return premium? Why are high-alpha stocks desirable investments for active portfolio managers? With all other parameters held fixed,

Why do we call alpha a “nonmarket” return premium? Why are high-alpha desirable investments for active managers? With all other parameters held fixed, what would happen to a portfolio’s Sharpe ratio as the alpha of its component securities increased?

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The total risk premium equals a b market risk premium We call alpha ... View full answer

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