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Jensen's Alpha Calculator — result sheet
Compare an entered portfolio return with the return implied by a risk-free rate, market return, and portfolio beta.
Inputs used
Results
Visual chart
Breakdown
Calculation steps
Returned data table
Formula and methodology
Formula: Jensen alpha = Rp − [Rf + βp(Rm − Rf)].
Jensen's alpha measures the difference between an entered portfolio return and the return predicted by a simple CAPM benchmark using the same period's risk-free rate, market return, and beta. The page keeps the benchmark return and market risk premium visible so visitors can see which assumption drives the comparison.
This result follows the calculator's declared inputs, precision, validation boundaries, and model limits.
Input contract
- Portfolio return — %; minimum -100; maximum 1000
- Risk-free rate — %; minimum -100; maximum 1000
- Portfolio beta — beta; minimum -1000; maximum 1000
- Market return — %; minimum -100; maximum 1000
Worked example
| Input | Value |
|---|---|
| Portfolio return | 20 |
| Risk-free rate | 3 |
| Portfolio beta | 1.2 |
| Market return | 12 |
The CAPM-implied return is 13.8%, so the entered return produces a Jensen alpha of 6.2 percentage points.
Assumptions and limits
- All return inputs describe the same period and use percentage points rather than mixed annual and monthly data.
- Beta is the portfolio beta appropriate to the selected market benchmark and period.
- The result is a descriptive model comparison, not a forecast, guarantee, appraisal, or investment recommendation.
Calculator note
Source and methodology
Use the official WorldCalculate methodology policy for the source, formula, precision, and boundary standards behind this calculator.
Planning estimate, not financial, medical, legal, or professional advice. © WorldCalculate — reuse with attribution. Built and curated by Hassan ALRowaie.
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