ALPHA HUNTERS AND BETA GAZERSInvestment and portfolio analysisGroup Members:Mahnoor IftikharRabbia Shahid Saad khwaja

Financial analysisAlpha is excess return that lets the investment manager beat the market. For most investors, Alpha and Beta are inseparable. When you buy an active mutual fund, for instance, youre buying a lot of Beta and a little bit of Alpha. The most sophisticated investors are now decoupling the two, separating their decisions about Alpha from their decisions about Beta. This new investing technique allows investors to gain increased control over their asset allocation strategies, control costs andmost importantlymaximize returns.Alpha hunters: Alpha hunters are active investment.Two types of alphas are: Allocation Alphas are broadly available and are more balanced Return- Risk structure. They are distinct in nature. Truly active skill based return enhancements derived from opportunist inefficiencies. Both alphas offer the potential for enhanced return and they can be combined to create exceptional opportunities.Alphas coming from Acute inefficiencies are easy to identify , are short term in nature and can be arbitrage away.Chronic inefficiencies are difficult to identify, more ambiguous and persistent. They arise because of structural or behavioral inefficiencies such as imbalance in capital flows.Inefficiencies occur when investors focus too much on outcome and fail to avaluate the investment process especially when outcome was positive.Beta Gazers are passive investment and are efficiency based. Beta is the linear return from market and alpha is the non-market related component of the return of an individual security or portfolio. Beta is the relationship between the returns from an investment and the risk associated with those returns. More-risky assets should have an associated risk premiumthe likelihood of higher returns. Any given universe of investments, then, can be seen to have its own Beta, and true manager skill should only be assessed once that Beta is understood.The Efficient Market Hypothesis (EMH) tells us that the market is, over the long term, efficient: Any one managers gain is anothers loss, and on average, the market price is the right price.