AFL Library

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Details:

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Description:

Alpha, Beta and R_Squared, Indicator plots the Alpha and Beta and produces a read
out of values in the title bar of the Alpha, Beta and R_Squared. If you want to Plot the
R_Squared remove the slashes // in front of all Graph2 references....

Formula:

///Alpha AND Beta Indicators
//Ver.1.00, 2/10/02
//coded by Anthony Faragasso
//e-mail: ajf1111@epix.net

//Insert your Stock_index,Composite_index, S&P,etc.
//as the **Base Market**.

MaxGraph=5;

/***Base Market************/
Mkt="^ndx";//Must be enclosed in "....."Quotations.
P=Foreign(Mkt,"C",1);
/**************************/

Periods=21;//Set the period of Observation 

//****Beta***********************/ 

Beta=(( Periods * Sum(ROC( C,1) * ROC(P,1),Periods )) - (Sum(ROC(C,1),Periods)
* Sum(ROC( P,1),Periods))) / ((Periods * Sum((ROC(P,1)^2 ),Periods)) -
(Sum(ROC(P,1 ),Periods)^2 ));
/******************************************/

//*****Alpha*********************/ 

Alpha=(Sum(ROC( C,1) ,Periods) - ( Beta ) * Sum( ROC( P,1) ,Periods ) )  /
Periods;
/******************************************/

/***R-Squared*****************/
R2=Correlation(P,C,Periods)^2;
/************************************/
Graph0=Beta;
Graph0Style=1;
Graph1=Alpha;
Graph1=(LastValue(Highest(Graph0))/LastValue(Highest(Graph1))) * Graph1;
Graph1Style=1;

/**R_squared graphing*****/
//Graph2=r2;
//Graph2Style=1;
//Graph2Color=2;
/*************************/
Title=Name()+"  "+"ALPHA "+"("+WriteVal(Alpha,format=1.2)+")"+" "+"  BETA
"+"("+WriteVal(Beta,format=1.2)+")"+" "+" R_SQUARED
"+"("+WriteVal(r2,format=1.2)+")";

/**Notes***/
//You've got to start with r-squared, which is an
//indicator of the validity of the beta AND alpha
//measures. Because the r-squared measures just how 
//closely the Stock OR fund tracks the
//index with which it is being compared.

//An r-squared of 1.0 indicates
//A perfect match. AND, in that case, you can
//trust that the beta AND alpha measures are
//valid, too. But, the lower the r-squared, the less
//reliable beta AND alpha measures are. 

//"[Betas and alphas on] a Stock or  fund with an r-squared that's below //0.50
are completely meaningless.

//Assuming the r-squared is, say, 0.75 OR higher, you can move on to the
//beta.

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