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What Is Jensen's Alpha? Overview, How It's Calculated

By Kristi WaterworthUpdated Sep 11, 2025 at 7:48 PM | Fact-checked by Frank Bass

Key Points

  • Jensen's Alpha measures whether an asset outperforms, underperforms, or matches its benchmark.
  • Positive alpha indicates superior performance; negative alpha suggests underperformance.
  • Calculate alpha using returns, risk-free rate, benchmark returns, and beta of the investment.

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