Using the Jensen approach, the adequacy of a portfolio manager's performance cannot be judged against the market line.

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The Jensen approach, also known as the alpha model or the Capital Asset Pricing Model (CAPM), compares the portfolio manager's actual return to the expected return based on the risk taken, as per the Security Market Line (SML). It measures the manager's ability to generate excess returns (alpha) beyond the market return adjusted for risk. Hence, the adequacy of a portfolio manager's performance is judged against the SML, not the market line.

Using the Jensen Approach, the Adequacy of a Portfolio Manager's