Macroeconomics & Investing · Entry 28 of 71

What is Jensen's Measure?

Evaluating manager skill and risk-adjusted excess returns (Alpha)

Core Definition

Jensen's Measure (Jensen's Alpha) is a performance metric that evaluates an investment's return relative to its expected return based on its level of market risk, as defined by the Capital Asset Pricing Model (CAPM).

Key Insight

It shows whether a portfolio or asset has generated excess returns after adjusting for systematic risk (Beta), acting as a reliable indicator of a portfolio manager's genuine skill.