Jensen's Index

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Jensen's Index

A measure of the return on a portfolio over what the capital asset pricing model predicts, given the beta and market return on that portfolio. The index also adjusts for risk. It is also called Jensen's alpha or Jensen's measure. It is calculated as:

Jensen's Index = ((Portfolio's return - Risk-free return) + (Market return - Risk-free return)) * Beta
References in periodicals archive ?
Although the returns rankings based on Jensen's measure is a helpful tool in analyzing relative fund performance, the Jensen's alpha is a more meaningful metric when viewed from an absolute returns standpoint.
6429 Ranking between Treynor and Jensen's Measure = 0.
Klemosky (1973) introduced mean absolute deviation and semi-standard deviation as risk surrogates compared to the composite measures derived from the CAPM to remove bias in Sharpe, Treynor, and Jensen's measures.