Asked by: Montaña Henseleasked in category: General Last Updated: 14th January, 2020
What is an excess return?
Click to see full answer.
Considering this, what is Excess Return Index?
Usually the term “excess return” refers to the total return of an index with some benchmark subtracted from it. A common benchmark is the return on cash (T bills) over that time period.
Additionally, is Alpha the same as excess return? Alpha is excess return calculated on a risk-adjusted basis. The job of an active fund manager is to provide excess returns on a risk-adjusted basis, NOT just excess return.
Subsequently, one may also ask, how do you calculate excess return?
Excess return is identified by subtracting the return of one investment from the total return percentage achieved in another investment. When calculating excess return, multiple return measures can be used. Some investors may wish to see excess return as the difference in their investment over a risk-free rate.
Is risk premium the same as excess return?
Many experts claim that there is no reason why some type of premium should be associated with all types of risk. In other words, a risk premium is the expected excess return on an investment, where the excess return is the difference between the return of a risk-free security and an actual return.