The Jensen-Treynor alpha is equal to:
A)the Treynor ratio divided by Jensen's alpha.
B)the Treynor ratio multiplied by Jensen's alpha.
C)Jensen's alpha divided by beta.
D)Jensen's alpha divided by the standard deviation.
E)Jensen's alpha divided by the Treynor ratio.

Question

Quizplus · Accepted Answer

Jensen's alpha divided by beta is the correct formula for calculating the Jensen-Treynor alpha. This metric combines both Jensen's alpha, which measures a portfolio's excess return over the expected return, and beta, which measures the volatility or market risk of a portfolio.

The Jensen-Treynor Alpha Is Equal To