Jensen's alpha can be expressed as the excess return of a fund minus this value times the excess market return.
Jensen's alpha can be expressed as the excess return of a fund minus this value times the excess market return. In arbitrage pricing theory, this value is factor specific and thus requires multiple representations. In the capital assets pricing model, this value has only one representation and is graphed on the x-axis on the security market line. For risk-free securities, such as treasury bonds, this value is equal to 0, and for a market (*) portfolio, it is equal to one. For an individual asset, this value is equal to the covariance of the rate of return on the asset and the benchmark rate, divided by the variance of the benchmark rate. For 10 points, identify this value that measures a portfolio's risk due to movements in the market.
Jensen's alpha can be expressed as the excess return of a fund minus this value times the excess market return.
beta [or financial elasticity; or correlated relative volatility]