According to Jensen's differential return measure, which interpretation of alpha is incorrect?
A) If alpha is significantly positive, this is evidence of superior performance.
B) If alpha is significantly negative, this is evidence of interior performance.
C) If alpha is insignificantly different from zero, this is evidence that the portfolio manager did not match the market on a risk-adjusted basis.
D) All the above are correct interpretations of alpha.

Question

Quizplus · Accepted Answer

If alpha is insignificantly different from zero, it indicates that the portfolio manager's performance is similar to the market on a risk-adjusted basis, not that they failed to match the market.

According to Jensen's Differential Return Measure, Which Interpretation of Alpha