Multifactor Models of Risk

Fama French Carhart Model

We start by looking at the capital asset pricing model and we modeled the expected return of security (Ri) as a function of the risk-free rate of return plus beta for that security which is a measure of systemic risk and then we multiply that by …

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What is Jensen's alpha?

Jensen's alpha is the portion of the excess return of a security or a portfolio that is not explained by systematic risk and when I talk about the systematic risk I mean beta . Another way of putting it is that alpha is the difference between t…

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