Jensen's Alpha Formula - Finance
Learn the jensen's alpha formula with examples, step-by-step guide, and calculator tools. Determine a portfolio manager's skill by measuring excess returns above what the Capital Asset Pricing Model (CAPM) predicts
The jensen's alpha formula is a fundamental concept in finance. Determine a portfolio manager's skill by measuring excess returns above what the Capital Asset Pricing Model (CAPM) predicts. This page provides a comprehensive guide with worked examples and practical applications.
The Formula
Variables
Step-by-Step Guide
- 1
Step 1: Gather your data values
- 2
Step 2: Apply the formula
- 3
Step 3: Perform the calculations
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Step 4: Interpret the result
Examples
Example 1
Example 1: [0.12,0.03,1.2,0.1] → Jensen's Alpha = 12% - [3% + 1.2 × (10% - 3%)] = 12% - 11.4% = 0.6%
Example 2
Example 2: 0.006
Frequently Asked Questions
What is the jensen's alpha formula?
Determine a portfolio manager's skill by measuring excess returns above what the Capital Asset Pricing Model (CAPM) predicts
How do I calculate jensen's alpha formula?
Use the formula: \alpha = R_p - [R_f + \beta_p(R_m - R_f)]. Follow the steps provided above.
What tools can help with jensen's alpha formula?
We provide online calculators: npv-calculator, irr-calculator, profit-margin-calculator