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Jensen's alpha is a statistic that is commonly used in empirical finance to assess the marginal return associated with unit exposure to a given strategy. Generalizing the above definition to the multifactor setting, Jensen's alpha is a measure of the marginal return associated with an additional strategy that is not explained by existing factors.
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]
It is also possible to analyze a portfolio of investments and calculate a theoretical performance, most commonly using the capital asset pricing model (CAPM). Returns on that portfolio can be compared with the theoretical returns, in which case the measure is known as Jensen's alpha. This is useful for non-traditional or highly focused funds ...
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, through careful stock selection, have been able to extract higher returns than the market. 4 Funds With High Alpha You Should Grab ...
Jensen's alpha measures the return of an investment compared to its expected risk-adjusted return.
In finance, the Treynor reward-to-volatility model (sometimes called the reward-to-volatility ratio or Treynor measure [1]), named after American economist Jack L. Treynor, [2] is a measurement of the returns earned in excess of that which could have been earned on an investment that has no risk that can be diversified (e.g., Treasury bills or a completely diversified portfolio), per unit of ...
Jensen's Performance Index measures the return of an investment compared to its expected risk-adjusted return.