Final answer:
Fairly-priced securities according to CAPM have zero alphas, indicating that they are performing as expected for their level of risk. Positive beta indicates movement with the market trend, while positive weighted alpha indicates strong stock performance.
Step-by-step explanation:
According to the Capital Asset Pricing Model (CAPM), fairly-priced securities have zero alphas. Alpha represents the excess return of an investment relative to the return of a benchmark index or the expected performance given the investment's beta and the average market return. A zero alpha indicates that the investment is performing exactly as expected given its level of risk, as measured by beta. By contrast, a positive alpha suggests the investment has outperformed expectations for its risk level, while a negative alpha suggests underperformance.
An investment's beta measures its volatility in relation to the market. A positive beta indicates that the stock generally moves in the same direction as the market, whereas a negative beta suggests that the stock typically moves in the opposite direction of the market. Securities with a positive weighted alpha are seen as having strong performance, since their price is rising. Conversely, those with a low or negative weighted alpha may not be performing well, as their price may be unchanged or declining.