An independent return factor that comes about from sources other than the usual beta returns (which per se result from the passive replication of a well-known asset class). False alphas include returns from unusual sources such as direct lending, insurance, and capturing risk premiums from business types of risk other than classic business types of risk. This non-standard sort of beta is like traditional betas in terms of its ability to be passively replicated. False alpha proxies include the ability to invest in derivatives of volatility indexes.

False alpha is sometimes used to refer to exotic beta.