Open main menu
Home
Random
Recent changes
Special pages
Community portal
Preferences
About Wikipedia
Disclaimers
Incubator escapee wiki
Search
User menu
Talk
Dark mode
Contributions
Create account
Log in
Editing
Jensen's alpha
(section)
Warning:
You are not logged in. Your IP address will be publicly visible if you make any edits. If you
log in
or
create an account
, your edits will be attributed to your username, along with other benefits.
Anti-spam check. Do
not
fill this in!
==History== Jensen's alpha was first used as a measure in the evaluation of [[mutual fund]] managers by [[Michael C. Jensen|Michael Jensen]] in 1968.<ref>[http://riskencyclopedia.com/articles/alpha/ "Alpha", Risk Encyclopedia] {{webarchive|url=https://web.archive.org/web/20131004231843/http://riskencyclopedia.com/articles/alpha/ |date=2013-10-04 }}</ref> The CAPM return is supposed to be 'risk adjusted', which means it takes account of the relative riskiness of the asset. This is based on the concept that riskier assets should have higher expected returns than less risky assets. If an asset's return is even higher than the risk adjusted return, that asset is said to have "positive alpha" or "abnormal returns". Investors are constantly seeking investments that have higher alpha. Since [[Eugene Fama]], many academics believe financial markets are too [[Efficient-market hypothesis|efficient]] to allow for repeatedly earning positive Alpha, unless by chance.{{Citation needed|reason=Reliable source needed for the whole sentence|date=November 2018}} Nevertheless, Alpha is still widely used to evaluate mutual fund and portfolio manager performance, often in conjunction with the [[Sharpe ratio]] and the [[Treynor ratio]].
Edit summary
(Briefly describe your changes)
By publishing changes, you agree to the
Terms of Use
, and you irrevocably agree to release your contribution under the
CC BY-SA 4.0 License
and the
GFDL
. You agree that a hyperlink or URL is sufficient attribution under the Creative Commons license.
Cancel
Editing help
(opens in new window)