Skillsfirst Level 3 Certificate in Introduction to Financial Trading (RQF) - UNIT 1: Principles of financial trading
Skillsfirst Level 3 Certificate in Introduction to Financial Trading (RQF) - UNIT 2: Principles of Financial Planning and Cash Flow in Financial Trading
Skillsfirst Level 3 Certificate in Introduction to Financial Trading (RQF) - UNIT 3: Understanding financial trading techniques

THE JENSON MEASURE

The Jenson Measure is based on CAPM and it calculates the excess return that a portfolio generates over its expected return (known as Alpha as explained above). It measures how much a portfolios rate of return is down to the ability of the portfolio manager to deliver above average returns adjusted to market risk. As with the Sharpe Ratio the higher the Jenson Measure ratio the better the risk adjusted returns. Consistently positive returns will show a positive alpha whilst a consistently negative return show a negative alpha.

The formula for the Jenson Measure is:

Jensen\’s Alpha = Portfolio Return – Benchmark Portfolio Return

Where: Benchmark Return (CAPM) = Risk-Free Rate of Return + Beta (Return of Market – Risk-Free Rate of Return)
Scroll to Top