Jensen's Alpha Calculator

About this calculator

Jensen's alpha measures the return a portfolio earned above what the Capital Asset Pricing Model (CAPM) predicted was fair compensation for its risk: α = Rp − [Rf + β(Rm − Rf)], where Rp is the portfolio's actual return, Rf the risk-free rate, β the portfolio's sensitivity to the market, and Rm the market return. A positive alpha means the manager beat the return justified by the risk (beta) taken; a negative alpha means they underperformed even after accounting for risk.

Developed by economist Michael Jensen in 1968 to evaluate mutual fund managers, it remains a core tool for portfolio managers, financial analysts, and investors deciding whether active management is adding genuine value versus simply taking on more market risk. Enter the portfolio return, risk-free rate, beta, and market return to compute alpha.