What is 'Jensen's Alpha'?

What is 'Jensen's Alpha'?

Approach: Define the excess return of a portfolio over its CAPM predicted return.

A risk-adjusted performance measure that represents the average return on a portfolio or investment, above or below that predicted by the Capital Asset Pricing Model (CAPM).

Follow-up: Does a positive Alpha imply superior stock picking?

Key concepts: alpha, beta, market return.