jensen alpha formula | BTCC Info Hub

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How do you calculate Jensen's Alpha?

The Jensen's alpha aims to do this and is calculated using a simple formula: Jensen's alpha = Portfolio return - [Risk Free Rate + Portfolio Beta * (Market Return - Risk Free Rate)].

Why is Jensen's Alpha useful in assessing investment performance?

The main reason that Jensen's alpha is useful in assessing investment performance is that the total return is often misleading. Given the same return, the fund with lower risk is usually preferred. Hence, Jensen's alpha is perfect for helping us compare investment performance fairly.

What is the difference between Treynor ratio and Jensen Alpha?

A key difference between Treynor Ratio and Jensen’s alpha is that the former refers to the risk-adjusted measure of investments’ returns. On the other hand, Jensen’s measure is the excess returns earned by investments over the expected market return.

What is Jensen's measure?

What Is the Jensen's Measure? The Jensen's measure, or Jensen's alpha, is a risk-adjusted performance measure that represents the average return on a portfolio or investment, above or below that predicted by the capital asset pricing model (CAPM), given the portfolio's or investment's beta and the average market return.

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