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Jensen Alpha Calculator

Work out jensen alpha instantly with clear inputs, formula shown and shareable results.

About Jensen Alpha Calculator

Jensen's alpha is the return earned above what CAPM required for the risk taken. A high raw return achieved with a high beta may produce no alpha at all, which is why alpha rather than raw return measures skill.

Formula

Jensen's alpha

α = R_p - [r_f + β(R_m - r_f)]

Worked example

With the default values below, Jensen Alpha Calculator returns Jensen's Alpha of 2.7000%. Change any input above and every figure here is recalculated in your browser.

Inputs used

Portfolio Returnaccepts 0–100 %
16 %
Risk-Free Rateaccepts 0–100 %
7 %
Portfolio Betaaccepts -3–5
1.05
Market Returnaccepts 0–100 %
13 %

Results

Jensen's Alpha
2.7000%
Return CAPM Required For That Beta
13.300%
Raw Excess Over The Risk-Free Rate
9.000%
Assessment
Outperformed on a risk-adjusted basis

Step by step

  1. 1Values used
  2. 2Jensen's alpha
  3. 3Jensen's Alpha= 2.7000
  4. 4Return CAPM Required For That Beta= 13.300
  5. 5Raw Excess Over The Risk-Free Rate= 9.000
  6. 6Assessment= Outperformed on a risk-adjusted basis

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax, fees or charges or compounding frequency into account.
  • Figures are rounded for display to 4 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.

Frequently Asked Questions

Is a positive alpha proof of skill?

Not from one period. Alpha needs to persist across time and survive fee and factor adjustments before it means anything.

What if beta is mis-estimated?

Alpha absorbs the error, so a wrong beta produces a spurious alpha. Always check the regression quality.

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Jensen Alpha Calculator – Calculate Jensen's Alpha