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Consider a small cap value portfolio where the investment manager generates 0.26% of Carhart alpha. The risk-free rate of return is 3.60%, the return of
Consider a small cap value portfolio where the investment manager generates 0.26% of Carhart alpha. The risk-free rate of return is 3.60%, the return of the market is 9.75%, the value risk premium is 3.50% and the size premium is 2.55%. This manager has an exposure to the value premium of 75% and a 50% exposure to the size premium. The consultant, who advises the client on the performance of the manager uses CAPM to assess manager performance and has determined the investment manager generated 0.68% of Jensen's alpha.
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Jensens alpha is calculated using the CAPM model as follows Jensens alpha Portfolio Return RiskFree ...
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Statistics For Business Decision Making And Analysis
Authors: Robert Stine, Dean Foster
2nd Edition
978-0321836519, 321836510, 978-0321890269
