n NISM Certifications
V-A NISM Series V-A
Medium

What is the difference between a mutual fund scheme's actual return and its optimal return known as? This is also a measure of a fund manager's performance.

Practice question from NISM Series V A - Mock Test 6 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Beta

  2. B

    Sharpe

  3. C

    Basis

  4. Alpha

    Correct answer

Why this is the answer

Alpha measures the difference between a fund's actual return and the return predicted by its risk level (Beta). Positive Alpha indicates that the fund manager has outperformed the market, while negative Alpha suggests underperformance.

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