Jensen's Alpha Calculator

Calculate Jensen's Alpha to evaluate the excess return of a portfolio over its expected return based on the Capital Asset Pricing Model (CAPM). Suitable for finance professionals and CFA candidates.

Jensen's Alpha Calculator

This calculator helps finance professionals and CFA candidates to evaluate the performance of a portfolio by calculating Jensen's Alpha. It measures the excess return on a portfolio above the expected return, according to the Capital Asset Pricing Model (CAPM).

Calculator

Results

Jensen's Alpha 0.00%

Data Source and Methodology

All calculations are based on the Capital Asset Pricing Model (CAPM) and extensively referenced from authoritative financial textbooks and peer-reviewed papers. Please refer to your local financial regulations for precise applications.

The Formula Explained

Jensen's Alpha Formula:
\( \alpha = R_p - [R_f + \beta \times (R_m - R_f)] \)

Glossary of Terms

  • Portfolio Return (R_p): The return of the investment portfolio.
  • Risk-Free Rate (R_f): The return of an investment with zero risk, typically government bonds.
  • Market Return (R_m): The return of the market portfolio.
  • Beta (β): A measure of the portfolio's volatility in relation to the market.

How It Works: A Step-by-Step Example

Suppose your portfolio has a return of 12%, the risk-free rate is 2%, the market return is 8%, and the portfolio's beta is 1.1. Using the formula, Jensen's Alpha is calculated as:
\( \alpha = 12 - [2 + 1.1 \times (8 - 2)] = 2.6\% \).

Frequently Asked Questions (FAQ)

What is Jensen's Alpha?

Jensen's Alpha is a measure of the excess return that a portfolio generates over its expected return, predicted by the CAPM.

Why is Jensen's Alpha important?

It helps investors understand how much value a manager adds to a portfolio with his investing skills.

How do I interpret a positive Jensen's Alpha?

A positive Jensen's Alpha indicates the portfolio has outperformed the market's expected return.


Last reviewed on October 5, 2023.

Audit: Complete
Formula (LaTeX) + variables + units
This section shows the formulas used by the calculator engine, plus variable definitions and units.
Formula (extracted LaTeX)
\[','\]
','
Formula (extracted text)
Jensen's Alpha Formula: \( \alpha = R_p - [R_f + \beta \times (R_m - R_f)] \)
Variables and units
  • No variables provided in audit spec.
Sources (authoritative):
Changelog
Version: 0.1.0-draft
Last code update: 2026-01-19
0.1.0-draft · 2026-01-19
  • Initial audit spec draft generated from HTML extraction (review required).
  • Verify formulas match the calculator engine and convert any text-only formulas to LaTeX.
  • Confirm sources are authoritative and relevant to the calculator methodology.
Verified by Ugo Candido on 2026-01-19
Profile · LinkedIn

Full original guide (expanded)

Skip to main contentSkip to main content

Jensen's Alpha Calculator

This calculator helps finance professionals and CFA candidates to evaluate the performance of a portfolio by calculating Jensen's Alpha. It measures the excess return on a portfolio above the expected return, according to the Capital Asset Pricing Model (CAPM).

Calculator

Results

Jensen's Alpha 0.00%

Data Source and Methodology

All calculations are based on the Capital Asset Pricing Model (CAPM) and extensively referenced from authoritative financial textbooks and peer-reviewed papers. Please refer to your local financial regulations for precise applications.

The Formula Explained

Jensen's Alpha Formula:
\( \alpha = R_p - [R_f + \beta \times (R_m - R_f)] \)

Glossary of Terms

  • Portfolio Return (R_p): The return of the investment portfolio.
  • Risk-Free Rate (R_f): The return of an investment with zero risk, typically government bonds.
  • Market Return (R_m): The return of the market portfolio.
  • Beta (β): A measure of the portfolio's volatility in relation to the market.

How It Works: A Step-by-Step Example

Suppose your portfolio has a return of 12%, the risk-free rate is 2%, the market return is 8%, and the portfolio's beta is 1.1. Using the formula, Jensen's Alpha is calculated as:
\( \alpha = 12 - [2 + 1.1 \times (8 - 2)] = 2.6\% \).

Frequently Asked Questions (FAQ)

What is Jensen's Alpha?

Jensen's Alpha is a measure of the excess return that a portfolio generates over its expected return, predicted by the CAPM.

Why is Jensen's Alpha important?

It helps investors understand how much value a manager adds to a portfolio with his investing skills.

How do I interpret a positive Jensen's Alpha?

A positive Jensen's Alpha indicates the portfolio has outperformed the market's expected return.


Last reviewed on October 5, 2023.

Audit: Complete
Formula (LaTeX) + variables + units
This section shows the formulas used by the calculator engine, plus variable definitions and units.
Formula (extracted LaTeX)
\[','\]
','
Formula (extracted text)
Jensen's Alpha Formula: \( \alpha = R_p - [R_f + \beta \times (R_m - R_f)] \)
Variables and units
  • No variables provided in audit spec.
Sources (authoritative):
Changelog
Version: 0.1.0-draft
Last code update: 2026-01-19
0.1.0-draft · 2026-01-19
  • Initial audit spec draft generated from HTML extraction (review required).
  • Verify formulas match the calculator engine and convert any text-only formulas to LaTeX.
  • Confirm sources are authoritative and relevant to the calculator methodology.
Verified by Ugo Candido on 2026-01-19
Profile · LinkedIn
Skip to main content

Jensen's Alpha Calculator

This calculator helps finance professionals and CFA candidates to evaluate the performance of a portfolio by calculating Jensen's Alpha. It measures the excess return on a portfolio above the expected return, according to the Capital Asset Pricing Model (CAPM).

Calculator

Results

Jensen's Alpha 0.00%

Data Source and Methodology

All calculations are based on the Capital Asset Pricing Model (CAPM) and extensively referenced from authoritative financial textbooks and peer-reviewed papers. Please refer to your local financial regulations for precise applications.

The Formula Explained

Jensen's Alpha Formula:
\( \alpha = R_p - [R_f + \beta \times (R_m - R_f)] \)

Glossary of Terms

  • Portfolio Return (R_p): The return of the investment portfolio.
  • Risk-Free Rate (R_f): The return of an investment with zero risk, typically government bonds.
  • Market Return (R_m): The return of the market portfolio.
  • Beta (β): A measure of the portfolio's volatility in relation to the market.

How It Works: A Step-by-Step Example

Suppose your portfolio has a return of 12%, the risk-free rate is 2%, the market return is 8%, and the portfolio's beta is 1.1. Using the formula, Jensen's Alpha is calculated as:
\( \alpha = 12 - [2 + 1.1 \times (8 - 2)] = 2.6\% \).

Frequently Asked Questions (FAQ)

What is Jensen's Alpha?

Jensen's Alpha is a measure of the excess return that a portfolio generates over its expected return, predicted by the CAPM.

Why is Jensen's Alpha important?

It helps investors understand how much value a manager adds to a portfolio with his investing skills.

How do I interpret a positive Jensen's Alpha?

A positive Jensen's Alpha indicates the portfolio has outperformed the market's expected return.


Last reviewed on October 5, 2023.

Audit: Complete
Formula (LaTeX) + variables + units
This section shows the formulas used by the calculator engine, plus variable definitions and units.
Formula (extracted LaTeX)
\[','\]
','
Formula (extracted text)
Jensen's Alpha Formula: \( \alpha = R_p - [R_f + \beta \times (R_m - R_f)] \)
Variables and units
  • No variables provided in audit spec.
Sources (authoritative):
Changelog
Version: 0.1.0-draft
Last code update: 2026-01-19
0.1.0-draft · 2026-01-19
  • Initial audit spec draft generated from HTML extraction (review required).
  • Verify formulas match the calculator engine and convert any text-only formulas to LaTeX.
  • Confirm sources are authoritative and relevant to the calculator methodology.
Verified by Ugo Candido on 2026-01-19
Profile · LinkedIn
Formulas

(Formulas preserved from original page content, if present.)

Version 0.1.0-draft
Citations

Add authoritative sources relevant to this calculator (standards bodies, manuals, official docs).

Changelog
  • 0.1.0-draft — 2026-01-19: Initial draft (review required).