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Audit the skill. Calculate Jensen's Alpha to determine the excess return of a portfolio over what is predicted by CAPM.
Step-by-step breakdown of the underlying equations.
Rf + Beta × (Rm - Rf)Actual Return - Expected ReturnA positive alpha of 3.40% suggests that the manager (or strategy) has added value through superior selection or timing, exceeding the return of 10.60% that would be expected purely from the portfolio's market exposure (Beta).