The portfolio manager of Diversity Mutual Fund wants to calculate Jensen's alpha for the fund. The fund's average return is 12% and the average risk-free rate is 2%. The average market risk premium is 5.5% per year, the average return of HML factor is 5% per year, and the average return of SMB factor is 2.5% per year. He also calculated the beta of his fund for the market factor as 0.75, for the HML factor as 0.5, and for the SMB factor as 0.20. 

Find what is Jensen's alpha based on the Fama-French three-factor model?

Answer rating: 100% (QA)

Jensens alpha is a measure of the excess return of an investment compared to its expected return bas... View the full answer