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Portfolio Return vs CAPM Benchmark Calculator

Calculate Jensen’s alpha from portfolio return, beta and a market-return benchmark.

  • Formula & worked example
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Calculator inputs

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How to use this calculator

  1. Enter the known values in the units shown. Results update as you type.
  2. Edit a calculated value to solve backwards, or lock a value to hold it fixed.
  3. Use the worked example to check the method. Reset restores the starting fields.

Use the result with context

Results are estimates for planning and education. Confirm rates, taxes, fees, and legal requirements with the relevant institution or a qualified professional before making a financial decision.

Formula and method

With a 2% risk-free rate, market return of 8% and beta of 1.5, the CAPM benchmark is 11%. A portfolio return of 14% is three percentage points above that benchmark.

Alpha = portfolio return − [risk-free rate + beta × (market return − risk-free rate)]

Worked example

Enter these known values and leave the other values blank.

Portfolio return
14 %
Risk-free rate
2 %
Portfolio's beta
1.5
Market rate of return
8 %
Alpha (percentage points)
3 %

Assumptions and limitations

  • Use portfolio, risk-free and market returns for the same period and compatible return conventions. Beta must refer to the chosen market benchmark.
  • The optional beginning/ending value calculation measures simple price change. Cash contributions, withdrawals and distributions require a suitable total-return calculation before comparison.
  • Alpha is the arithmetic return difference under the CAPM relation. It does not assess statistical significance, estimation error or future performance.

Common questions

Does positive alpha mean the portfolio beat the market return?

It means the portfolio exceeded the CAPM benchmark after the entered beta and risk-free rate are applied. The raw market return can be different from that benchmark. Alpha is a difference in percentage points, not a percentage increase over the benchmark.

References

The calculation equations, inverse formulas, units, and input rules were imported from this source. Bookify provides the interface and equation solver.

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