Jensen's Measure
Jensen's Measure is a tool used by investment professionals to evaluate how well an investment portfolio or fund performs compared to what would be expected. Think of it like a report card that shows if a portfolio manager is doing better or worse than they should, considering the risks they're taking. It's also sometimes called "Jensen's Alpha" or just "Alpha." This measurement helps employers understand if a candidate has experience in analyzing investment performance beyond just looking at simple returns. Similar performance measures include the Sharpe Ratio and Treynor Ratio, but Jensen's Measure is specifically focused on showing if a manager is adding extra value through their investment decisions.
Examples in Resumes
Used Jensen's Measure to evaluate and rank fund manager performance across 20+ portfolios
Implemented Jensen's Alpha analysis in quarterly performance reports for client portfolios
Applied Jensen's Measure and other risk-adjusted metrics to improve portfolio selection process
Typical job title: "Portfolio Analysts"
Also try searching for:
Where to Find Portfolio Analysts
Professional Organizations
Online Communities
Job Boards
Example Interview Questions
Senior Level Questions
Q: How would you explain Jensen's Measure to a client who has no financial background?
Expected Answer: A senior analyst should be able to simplify the concept into everyday terms, perhaps using analogies, while maintaining accuracy. They should explain it as a way to measure if their investment decisions are adding extra value beyond what would be expected given the level of risk.
Q: When might Jensen's Measure give misleading results?
Expected Answer: The candidate should discuss practical limitations, such as during unusual market conditions, with new funds that have limited history, or when comparing very different types of investments. They should demonstrate understanding of when to use alternative performance measures.
Mid Level Questions
Q: How do you use Jensen's Measure alongside other performance metrics?
Expected Answer: Should explain how they combine Jensen's Measure with other tools like Sharpe Ratio or Treynor Ratio to get a complete picture of performance, and when each measure is most appropriate.
Q: What information do you need to calculate Jensen's Measure?
Expected Answer: Should mention portfolio returns, risk-free rate, market returns, and beta, explaining in simple terms why each component is important for the calculation.
Junior Level Questions
Q: What does a positive Jensen's Measure tell you about a portfolio?
Expected Answer: Should explain that a positive measure means the portfolio is performing better than expected given its risk level, showing the manager is adding value through their decisions.
Q: How often should Jensen's Measure be calculated for a portfolio?
Expected Answer: Should discuss typical reporting periods (monthly, quarterly, annually) and why regular monitoring is important for evaluating portfolio performance.
Experience Level Indicators
Junior (0-2 years)
- Basic understanding of portfolio performance metrics
- Ability to calculate Jensen's Measure using software
- Knowledge of basic market concepts
- Report preparation and data collection
Mid (2-5 years)
- Analysis of multiple performance measures
- Performance attribution analysis
- Client reporting and communication
- Understanding of risk-adjusted returns
Senior (5+ years)
- Advanced portfolio analysis
- Investment strategy development
- Team leadership and mentoring
- Complex performance evaluation
Red Flags to Watch For
- Unable to explain Jensen's Measure in simple terms
- Lack of understanding of basic market concepts
- No experience with portfolio analysis software
- Poor grasp of risk-return relationships
Related Terms
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