Jensen's Alpha
Definition
What is Jensen's Alpha?
Return above that predicted by the Capital Asset Pricing ModelA model linking expected return to the risk-free rate, market risk premium, and an asset's beta. for the portfolioThe complete collection of investments owned by an investor or managed under one mandate.'s beta.
Example in practice
How This Looks in Practice
Positive Jensen's alpha indicates performance beyond the model's expected returnThe probability-weighted average of possible future returns or an estimate of future return..
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Related Terms
Correlation
A statistic ranging from minus one to plus one that describes how two return series move together.
Portfolio AnalyticsPositive Correlation
A relationship in which two assets tend to move in the same direction.
Portfolio AnalyticsNegative Correlation
A relationship in which two assets tend to move in opposite directions.
Risk ManagementStress Test
An analysis of portfolio performance under severe but plausible scenarios.