Is Alpha from CAPM same as Excess return?

[iregula]

Is Alpha from CAPM(the intercept term) the same as the alpha from the Excess return equation
Excess Return - Required return?

 

[swaptiongamma]

I thought the intercept term for CAPM was Risk Free Rate.

 

[iregula]

Woops yea i got confused for a second on a question that labeled RFR as alpha

 

[Dreary]

You are right, in the general regression form (like CAPM), the intercept is alpha. But that’s not same as alpha in an excess return sense.

 

[swaptiongamma]

Mind explaining???
CAPM equation is: E(Ri) = RFR + beta*(E(Rm) - RFR)
comparing it to Y = mx + c (standard equation of a line)
Y = E(Ri) = Y-axis
X = beta = X-axis
c = RFR = intercept
m = (E(Rm) - RFR) = slope

 

[TheAliMan]

swaption, you and I had discussed this last night.
(Ri - RFR) = alpha + beta(Rmarket - RFR)
if alpha is zero, then explanatory power comes from beta (although never 100% as proven by low correlations)
if alpha = 0
then Ri - RFR = beta*mkt risk premium
Ri = RFR + beta*mkt risk prem
Compare this to market model, which just plots
E(R) = alpha + beta*E(mkt)