|ER[a]||=||Expected return on investing in American Airlines|
|ER[b]||=||Expected return on market index or selected benchmark|
|BETA||=||Beta coefficient between American Airlines and the market|
|RFR||=||Risk Free Rate of return. Typically T-Bill Rate|
Jensen Alpha ComparisonJensen alpha is the difference between the return of the portfolio, and what the portfolio should theoretically have earned. Any portfolio can be expected to earn the risk free rate (RF), plus the market risk premium (which is given by [Beta x (Market Portfolio Return - Risk Free Rate)]. Anything remaining over and above is alpha.
|Compare American Airlines to competition|