Editing Jensen's alpha (section)

{{Short description|Financial calculation}}
In finance, '''Jensen's alpha'''<ref>[https://ssrn.com/abstract=244153 Jensen, M.C., "The Performance of Mutual Funds in the Period 1945-1964," Journal of Finance 23, 1968, pp. 389-416.]</ref> (or '''Jensen's Performance Index''', '''ex-post alpha''') is used to determine the abnormal return of a security or [[Portfolio (finance)|portfolio]] of securities over the theoretical expected return. It is a version of the [[alpha (finance)|standard alpha]] based on a theoretical performance instead of a [[Stock market index|market index]].

The security could be any asset, such as stocks, bonds, or derivatives. The theoretical return is predicted by a market model, most commonly the [[capital asset pricing model]] (CAPM). The market model uses statistical methods to predict the appropriate risk-adjusted return of an asset. The CAPM for instance uses [[Beta coefficient|beta]] as a multiplier.