Jensen's Alpha
Jensen's Alpha is a risk-adjusted performance measure that estimates the excess return of a portfolio relative to the return predicted by the Capital Asset Pricing Model (CAPM) given the portfolio's beta.
Example: For a portfolio that returns 9% in a year, with a risk-free rate of 2% and a market return of 8%, and a beta of 1.0, Jensen's Alpha would be 1 percentage point (9% - [2% + 1.0 × (8% - 2%)]).
💬 Comments