Which of the following statements is true about a stocks alp

Which of the following statements is true about a stock\'s alpha? Check all that apply: It represents the difference between a stock\'s fair expected value and the risk premium on the market portfolio. Fairly priced stocks have zero alphas Overpriced stocks have positive alphas It represents the difference between a stock\'s fair expected value and its actual expected value Fairly priced stocks have positive alphas Submit

Solution

Alpha: The difference between the expected return and required return.

Positive Alpha: When the stock is undervalued.

Negative Alpha: When the stock is overvalued.

Alpha becomes Zero: When the stock is properly valued.

So statement is true about a stock’s Alpha is fairly priced stock have zero alphas.