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At Novus, it‚Äôs our mission to¬†give investors the power to measure and improve¬†investment skill. That‚Äôs exactly what we‚Äôve been¬†doing this last decade with a mountain of unwieldy¬†public and private data‚Äîcontaining every¬†conceivable stat on the investment management¬†process‚Äîand even some that we created¬†ourselves. Measuring alpha is a big part of why¬†we exist.¬†But what exactly is it?¬†Shouldn‚Äôt the idea be completely objective?
In our pursuit of alpha, we must¬†consider the views of many investors and have¬†constructed a flexible framework allowing the¬†investor to superimpose their own perception of¬†alpha onto the data. Accordingly, what seems¬†like alpha to one investor is just beta to another.¬†It‚Äôs complicated.
The best way to work out an argument is to¬†find common ground. And one thing on which we¬†can all agree is that alpha is a relative concept,¬†not an absolute. In this piece, we'll¬†look at some options using a simulated¬†portfolio to drive to the heart of the question, testing each concept for accuracy.
Download our latest piece to learn more.