Chartered Retirement Planning Counselor (CRPC) Practice Exam 2025 - Free CRPC Practice Questions and Study Guide.

Alpha is commonly referred to as the Jensen Index, which was developed by economist Michael Jensen. This measure evaluates the excess return of an investment relative to the return expected given its risk level, as assessed by the Capital Asset Pricing Model (CAPM).

Alpha provides investors with insights into how much value a portfolio or investment manager has added beyond the market benchmark, taking into account the risk profile. A positive alpha indicates outperformance compared to the benchmark, while a negative alpha suggests underperformance.

Understanding Alpha is vital for investors aiming to assess the skill of fund managers in generating returns that exceed what would be predicted based on market movements and associated risk. This context highlights its importance in the field of investment performance analysis.