How is Jensen measure calculated?
How is Jensen measure calculated?
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)].
Who developed Jensen ratio?
economist Michael Jensen
Jensen’s measure,Jensen’s alpha, capital asset pricing model. Developed by American economist Michael Jensen in 1968, the model is used to monitor the performance of mutual fund managers on a risk-adjusted basis.
What is an alpha calculator?
This calculator will compute the alpha value (also known as the Average Differential Return) for a market security, given the security’s beta value and market return rate, and the risk-free rate of return.
How do I calculate beta?
Beta could be calculated by first dividing the security’s standard deviation of returns by the benchmark’s standard deviation of returns. The resulting value is multiplied by the correlation of the security’s returns and the benchmark’s returns.
Is Jensen’s alpha the intercept?
The Jensen’s alpha is the intercept of the regression equation in the Capital Asset Pricing Model and is in effect the exess return adjusted for systematic risk.
Is alpha better than beta?
Alpha shows how well (or badly) a stock has performed in comparison to a benchmark index. Beta indicates how volatile a stock’s price has been in comparison to the market as a whole. A high alpha is always good.
Is positive alpha overpriced?
According to the Capital Asset Pricing Model (CAPM), a. a security with a positive alpha is considered overpriced. a security with a zero alpha is considered to be a good buy.
How do you calculate annualized alpha?
Formulas: Alpha = Fund Average Excess Return − (Beta × Benchmark Average Excess Return) Annualized Alpha = (Number of Time Units Per Year/Number of Time Units Per Sub Period) X Alpha.
How to calculate Jensen’s Alpha?
The Jensen’s Alpha Formula
What is the Jensen’s Alpha formula?
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)] .
What is Jensen Performance Index?
Jump to navigation Jump to search. In finance, Jensen’s alpha (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 index instead of a market index.
