Jensen's Alpha
Definition
A risk-adjusted performance measure that represents the excess return of a portfolio over what the CAPM predicts.
Formula / Rules
α = R_p - [R_f + β(R_m - R_f)]
Example
Positive Jensen's alpha shows the manager outperformed the expected return for the given risk level.
Related Terms
Frequently Asked Question
What is Jensen's Alpha?
Jensen's Alpha is a risk-adjusted performance measure representing the excess return of a portfolio over what CAPM predicts. Positive alpha means the manager outperformed expectations for the given risk level.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.