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A Bias in Jensen’s Alpha When Returns Are Serially Correlated
College of Business, Korea Advanced Institute of Science and Technology, Seoul, South Korea
- 1 College of Business, Korea Advanced Institute of Science and Technology, Seoul, South Korea
- 2
Theoretical Economics Letters·Volume 03 (2013)·Pages 188–190·Published 7 June 2013·DOI10.4236/tel.2013.33031
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Abstract
This paper shows that Jensen’s alpha may be a biased performance measure even for public-information-based portfolios, unless the benchmark portfolio return has no serial correlation, and the bias can be substantial even when the underlying asset pricing model holds.
KeywordsPerformance MeasurementJensen’s AlphaTime-Varying Risk
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