Active return vs. Residual return

CFA Level II Portfolio Management
#1

Reading 57 using active return

Reading 58 using residual return

But both definition is the return of a portfolio in excess of its benchmark.

Why CFA use different name? Any purpose? Thanks.

Regards,

Frank

#2

it’s not the same, residual return is adjusted for the difference in beta.

#3

Thanks. But what’s the adjustment residual return use?

#4

ok. I think I get it. Active return using leverage but residual return(Alpha) do not. Please correct me if I’m wrong. Thanks!

#5

ok. I think I get it. Active return using leverage but residual return(Alpha) do not. Please correct me if I’m wrong. Thanks!