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In finance, Jensen's alpha [1] (or Jensen's Performance Index, ex-post alpha) is used to determine the abnormal return of a security or portfolio of securities over the theoretical expected return. It is a version of the standard alpha based on a theoretical performance instead of a market index .
Also known as the Jensen's Performance Index, it measures the return of an investment compared to its expected risk-adjusted return. 3 Funds With High Alpha for Above Average Returns Skip to main ...
A positive Jensen's alpha indicates that managers of the fund have been able to extract higher returns than the market. 4 High Alpha Mutual Funds That You Must Add to Your Portfolio Skip to main ...
Jensen's alpha measures the return of an investment compared to its expected risk-adjusted return. Skip to main content. 24/7 Help. For premium support please call: 800-290-4726 more ...
This measure became known as Jensen's alpha, and became widely used to measure the performance of mutual funds and other investments by both academics and practitioners. Jensen's best-known work is the 1976 Journal of Financial Economics article he co-authored with William H. Meckling , "Theory of the Firm: Managerial Behavior, Agency Costs and ...
Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index. An alpha of 1% means the investment's return on investment over a selected period of time was 1% better than the market during that same period; a negative alpha means the investment underperformed the market.
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The information ratio is often annualized. While it is then common for the numerator to be calculated as the arithmetic difference between the annualized portfolio return and the annualized benchmark return, this is an approximation because the annualization of an arithmetic difference between terms is not the arithmetic difference of the annualized terms. [6]