The average return, standard deviation, and beta for Fund A is given below along with data for the S&P 500 Index. Fund Average Return Standard Deviation Beta A 22.9% 24% 1.4 S&P 500 15.7% 19% 1 Risk-free 3.5% Calculate the Jensen's alpha measure of performance for Fund A only. ENTER your answer using THREE DECIMAL places. Use the correct sign if the answer is negative! Example: -1.234
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
The average return, standard deviation, and beta for Fund A is given below along with data for the S&P 500 Index.
| Fund | Average Return | Standard Deviation | Beta |
| A | 22.9% | 24% | 1.4 |
| S&P 500 | 15.7% | 19% | 1 |
| Risk-free | 3.5% |
Calculate the Jensen's alpha measure of performance for Fund A only.
ENTER your answer using THREE DECIMAL places.
Use the correct sign if the answer is negative! Example: -1.234
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