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
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In order to compare the Jensen measure for individual portfolios with the slope measure of efficiency, we calculate the Jensen's alphas of the 10 beta-sorted stock portfolios for the periods with the smallest and the largest [Mathematical Expression Omitted] in Table 7.
This implies that even inefficient benchmarks can produce a zero Jensen measure and thus, a careful interpretation of the Jensen measure is required.
Jensen measures social protection in terms of all government cash benefits.
The Jensen Measures, repeated in Table 4, further support the superior performance of the market timing portfolio.