Which one of the following statements is correct if a portfolio has a Jensen measure of return of zero?
A) The portfolio has a total return of zero percent.
B) The portfolio earned exactly its expected return on a risk-adjusted basis.
C) The portfolio outperformed the market on a risk-adjusted basis.
D) The market provides a better return on a risk-adjusted basis.

Question

Quizplus · Accepted Answer

The Jensen measure (or Jensen's alpha) indicates how much of the portfolio's rate of return is attributable to the manager's ability to deliver above-average returns, adjusted for market risk. A Jensen measure of zero means that the portfolio earned exactly its expected return on a risk-adjusted basis, neither underperforming nor outperforming the market.

Which One of the Following Statements Is Correct If a Portfolio