Returns the Jensen's alpha measure in annual percentage rate (APR).
NxJensen($R^i$,$R^b$, $R_f$, Freq)
- is the portfolio simple rate of returns data series (a one-dimensional array of cells (e.g., rows or columns)).
- is the index/benchmark simple returns data (a one-dimensional array of cells (e.g., rows or columns)).
- is the risk-free simple returns data (a single value or a one-dimensional array of cells (e.g., rows or columns)). If missing, a zero (0) risk-free return is assumed.
- is the data sampling frequency per year (i.e., number of data points in one year) (e.g., 12 = monthly, 4 = quarterly, etc.). If missing, a monthly frequency is assumed.
The NxJensen function is available starting with NumXL version 1.68 CAMEL.
- In finance, Jensen's alpha (or Jensen's Performance Index, ex-post alpha) is used to determine the abnormal return of a security or portfolio of securities over the theoretical expected return.
- The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and expected return for assets.
- Per the CAPM, the formula for calculating the expected return of an asset is:
$$E[R^i] = R_f + \beta \times (E[R^b] - R_f) $$
- $E[R^i]$ is the expected return of investment.
- $R_f$ is the risk-free rate of return.
- $E[R^b]$ is the expected return on the overall market.
- $\beta$ is the CAPM beta of the investment.
- Jensen's alpha is a risk-adjusted performance measure representing the average return on a portfolio or investment, above or below that predicted by the CAPM, given the portfolio's or investment's beta and the average market return.
- Jensen's alpha accounts for the risk-free rate of return.
- By definition, all values in the input data set (i.e., X) must be greater than -1.
- The input data series may include missing values (e.g., #N/A, #VALUE!, #NUM!, empty cell), but they will not be included in the calculations.
- The sample data ($R^i$, $R^b$ or $R_f$) may include missing values.
- The number of rows of the response variable ($R^i$) must equal the number of rows of the explanatory variable ($R^b$ or $R_f$).
- Observations (i.e., rows) with missing values in $R^i$, $R^b$ or $R_f$ are removed.
- If the risk-free rate of return ($R_f$) argument contains one value, it is assumed the value is the risk-free annual rate of return.
- If the risk-free rate or return argument ($R_f$) contains multiple values (i.e., array), its size must be equal to the size of the portfolio return ($R^i$).
|=NxJensen(\$B\$2:\$B\$14,\$C\$2:\$C\$14,\$D\$2:\$D\$14,12)||Jensen Alpha (0.129528)|