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What is a good Jensen Alpha?

Author

James Craig

Updated on February 19, 2026

What is a good Jensen Alpha?

Jensen's measure is one of the ways to determine if a portfolio is earning the proper return for its level of risk. If the value is positive, then the portfolio is earning excess returns. In other words, a positive value for Jensen's alpha means a fund manager has "beat the market" with their stock-picking skills.

In respect to this, is higher or lower alpha better?

Alpha shows how well (or badly) a stock has performed in comparison to a benchmark index. Beta indicates how volatile a stock's price has been in comparison to the market as a whole. A high alpha is always good.

Similarly, is Jensen Alpha a percentage? Jensen's alphas are reported in a percentage format, indicating the percentage by which the portfolio over-or-under-performed the market on a risk-adjusted basis.

Beside this, what is considered a good Alpha?

A positive alpha of 1.0 means the fund or stock has outperformed its benchmark index by 1 percent. A similar negative alpha of 1.0 would indicate an underperformance of 1 percent. A beta of less than 1 means that the security will be less volatile than the market.

How is Jensen Alpha calculated in Excel?

Let's look at how Jensen's Alpha can be calculated in Excel.

Jensen's Alpha Calculator in Excel

  1. Rp = Returns of the Portfolio.
  2. Rf = Risk-free rate.
  3. β = Stock's beta.
  4. Rm = Market return.

Is a high alpha good or bad?

Alpha is one of the five major risk management indicators for mutual funds, stocks, and bonds. Alpha of greater than zero means an investment outperformed, after adjusting for volatility. When hedge fund managers talk about high alpha, they're usually saying that their managers are good enough to outperform the market.

Can the S&P 500 go to zero?

One stock can go to zero, but it's highly unlikely that 3,000 will. What's more, many indexes, such as the S&P 500, are weighted by capitalization — the number of shares outstanding multiplied by price. The bigger the stock, the bigger their impact on the index.

Is positive alpha overpriced?

According to the Capital Asset Pricing Model (CAPM), a. a security with a positive alpha is considered overpriced. a security with a zero alpha is considered to be a good buy.

What does a high alpha mean in statistics?

If you increase alpha, you both increase the probability of incorrectly rejecting the null hypothesis and also decrease your confidence level.

What is a good beta?

Key Takeaways. Beta is a concept that measures the expected move in a stock relative to movements in the overall market. A beta greater than 1.0 suggests that the stock is more volatile than the broader market, and a beta less than 1.0 indicates a stock with lower volatility.

What does Seeking Alpha mean?

"Alpha" (the Greek letter α) is a term used in investing to describe a strategy's ability to beat the market, or it's "edge." Alpha is thus also often referred to as “excess return” or “abnormal rate of return,” which refers to the idea that markets are efficient, and so there is no way to systematically earn returns

What makes a man a beta?

By very definition, beta males live their lives based on the values and vision of other people. They seek validation at every turn and because they lack self-reliance and a strong sense of personal identity, they fall into patterns of neediness and approval-seeking behaviors.

What's after alpha and beta?

Alpha, Beta, and Gamma

Similarly, the next letter in the alphabet, "gamma," while defined as "g," is often pronounced much more softly as well like a "y" sound in front of "i" and "e" as in "yield."

What does alpha female mean?

Here is the real definition of an alpha female, based on the latest research: Alpha Female: A woman who has embraced her leadership ambitions. She is talented, highly motivated, and self-confident. (From research here and here) Female alphas embrace their confidence and this helps them lead others.

What is Alpha risk?

Alpha risk is the risk in a statistical test that a null hypothesis will be rejected when it is actually true. The null hypothesis in a statistical test usually states that there is no difference between the value being tested and a particular number, such as zero or one.

What does Alpha mean in Greek?

As the first letter of the alphabet, Alpha as a Greek numeral came to represent the number 1. Therefore, Alpha, both as a symbol and term, is used to refer to the "first", or "primary", or "principal" (most significant) occurrence or status of a thing.

What does Alpha mean in a relationship?

Alpha refers to a dominant person or their behavior, especially with respect to socially aggressive, hyper-masculine men. Some dudebros see alpha as a compliment and aspiration. Others people see right into the small, sad, insecure hearts of the trying-too-hard alpha.

What alpha means?

(Entry 1 of 2) 1 : the 1st letter of the Greek alphabet — see Alphabet Table. 2 : something that is first : beginning.

Is Alpha positive or negative chemistry?

Alpha particles carry a positive charge, beta particles carry a negative charge, and gamma rays are neutral. An alpha particle is made up of two protons and two neutrons bound together.

What is a Alpha Wolf?

A wolf pack is really just another name for a family of wolves. The pack leaders are the alpha male and female. These two animals are dominant over all the other wolves in the pack. The alpha male and female are the only wolves that breed and produce pups in the pack, and they also get to eat first at kills.

What's an Omega?

1 : the 24th and last letter of the Greek alphabet — see Alphabet Table. 2 : the extreme or final part : end. 3a : a negatively charged elementary particle that has a mass 3270 times the mass of an electron.

How is Alpha calculated?

Alpha = R – Rf – beta (Rm-Rf)

R represents the portfolio return. Rf represents the risk-free rate of return. Beta represents the systematic risk of a portfolio. Rm represents the market return, per a benchmark.

Is Alpha the risk free rate?

Alpha is an index which is used for determining the highest possible return with respect to the least amount of the risk and according to the formula, alpha is calculated by subtracting the risk-free rate of the return from the market return and multiplying the resultant with the systematic risk of the portfolio

Is Alpha risk adjusted?

Risk-Adjusted Return Ratios – Jensen's Alpha

It measures the performance of an investment against a market index benchmark that represents the market movement as a whole. The alpha shows the performance of the investment after its risk is considered.

What is a good Treynor ratio?

When using the Treynor Ratio, keep in mind:

For example, a Treynor Ratio of 0.5 is better than one of 0.25, but not necessarily twice as good. The numerator is the excess return to the risk-free rate. The denominator is the Beta of the portfolio, or, in other words, a measure of its systematic risk.

What does Jensens Alpha measure?

The Jensen's measure, or Jensen's alpha, is a risk-adjusted performance measure that represents the average return on a portfolio or investment, above or below that predicted by the capital asset pricing model (CAPM), given the portfolio's or investment's beta and the average market return.

What is a good Sharpe ratio?

Usually, any Sharpe ratio greater than 1.0 is considered acceptable to good by investors. A ratio higher than 2.0 is rated as very good. A ratio of 3.0 or higher is considered excellent. A ratio under 1.0 is considered sub-optimal.

What is Alpha in regression?

the non-random/ structural component alpha+beta*xi – where x is the independent/ explanatory variable (unemployment) in observation i (UK) and alpha and beta are fixed quantities, the parameters of the model; alpha is called constant or intercept and measures the value where the regression line crosses the y-axis; beta

What is an Alpha ETF?

Alpha-seeking ETFs are equity funds attempting to outperform the market with various investment strategies. The most-recent ETF launched in the Alpha-Seeking space was the Swan Hedged Equity US Large Cap ETF HEGD in 12/22/20.

How is Jensen ratio calculated?

Jensen's Alpha Ratio

The ratio is calculated by subtracting funds beta from difference between funds return and risk-free return and multiplying the result by difference of index return and risk free return.

What does a negative CAPM mean?

Interpret the CAPM, II

When the covariance is negative, the beta is negative and the expected return is lower than the risk-free rate. A negative-beta asset requires an unusually low expected return because when it is added to a well-diversified portfolio, it reduces the overall portfolio risk.

What is the alpha in excel?

The term “alpha” refers to the measure of the highest return possible from a minimum amount of investment risk. In other words, alpha is the assessment tool to gauge the ability of a portfolio manager to generate a higher return on a risk-adjusted basis.

Where is the alpha symbol in Excel?

Selecting (Insert Tab, Symbol) will give you the complete character set for every font installed font on your PC. This dialog box makes it very easy to insert special symbols and characters into cells.

Greek Letters.

Alt +Symbol / Description
224Alpha - à
225Beta - á
226Gamma - â
235Delta - ë

How do you calculate risk free return in Excel?

Here we use a 10-year time period. To calculate an asset's expected return, start with a risk-free rate (the yield on the 10-year Treasury) then add an adjusted premium. The adjusted premium added to the risk-free rate is the difference in the expected market return times the beta of the asset.

How do you calculate beta in Excel?

To calculate beta in Excel:
  1. Download historical security prices for the asset whose beta you want to measure.
  2. Download historical security prices for the comparison benchmark.
  3. Calculate the percent change period to period for both the asset and the benchmark.
  4. Find the Variance of the asset using =VAR.

How do I calculate beta?

The formula for calculating beta is the covariance of the return of an asset with the return of the benchmark, divided by the variance of the return of the benchmark over a certain period.

How do you calculate portfolio beta?

Add up the value (number of shares x share price) of each stock you own and your entire portfolio. Based on these values, determine how much you have of each stock as a percentage of the overall portfolio. Multiply those percentage figures by the appropriate beta for each stock.

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