CFST1 Practice Test

1Single Choice

Which of the following best describes the distinction between alpha and beta in a systematic trading context?

A.Alpha is the return attributable to a strategy's exposure to systematic risk factors, while beta is the idiosyncratic excess return.
B.Alpha is the risk-adjusted excess return of a strategy beyond what would be explained by its factor exposures, while beta represents the strategy's sensitivity to those underlying factors.
C.Alpha refers exclusively to mean-reversion signals, while beta refers exclusively to momentum signals.
D.Alpha and beta are interchangeable terms describing the expected return of a systematic strategy.

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