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Q » Explain Jensen’s alpha.

Steven

06 Dec, 2025

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A » Jensen's alpha is a performance metric that evaluates the excess return a portfolio generates over its expected return, based on its risk level as measured by the Capital Asset Pricing Model (CAPM). It indicates how much a portfolio manager's stock-picking skills contribute to the portfolio's performance. A positive alpha suggests outperformance relative to the market, while a negative alpha indicates underperformance.

Michael

06 Dec, 2025

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A »Jensen's alpha measures a portfolio's excess return over the expected return predicted by the CAPM, given its beta. A positive alpha indicates the portfolio outperformed the market on a risk-adjusted basis, while a negative alpha indicates underperformance. It helps investors evaluate a portfolio manager's skill in generating returns beyond market expectations.

David

06 Dec, 2025

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