A market-adjusted excess return is:

Question

Quizplus · Accepted Answer

A market-adjusted excess return is the excess return an investment generates relative to its benchmark. It is calculated by subtracting the benchmark's return from the investment's return. In this case, the benchmark is represented by the market return on that date and the investment is represented by the equity. To adjust the investment's return for market risk, we must multiply its beta by the market return and subtract the result from the equity's return. Therefore, the correct formula is the equity's return less the equity's beta times the market return on that date.

A Market-Adjusted Excess Return Is