According to Jensen's differential return measure,what is alpha?
A)The intercept of the SML line
B)The intercept of the CML line
C)A means of identifying superior or inferior portfolio performance
D)The actual excess return on a portfolio during one period

Question

Quizplus · Accepted Answer

Jensen's differential return measure involves comparing the actual return on a portfolio with the expected return based on the security's beta and the market return. The difference between the two is the alpha, which is a measure of the portfolio's performance relative to expectations. Therefore, choice C is the correct answer as it identifies alpha as a means of identifying superior or inferior portfolio performance.

According to Jensen's Differential Return Measure,what Is Alpha