Overview
Jensen's Hypothesis is a key concept in finance that emphasizes the relationship between risk and expected returns. It suggests that investors can achieve higher returns by taking on more risk, which is a fundamental principle in investment strategies. Understanding this hypothesis helps investors m...
Key Terms
Example: Investing in stocks carries a higher risk than bonds.
Example: The return on a stock can be calculated as the change in its price plus any dividends received.
Example: A positive Jensen's Alpha indicates that the investment has outperformed its expected return.
Example: The S&P 500 is a common benchmark for U.S. stocks.
Example: An investor's portfolio may include a mix of stocks and bonds.
Example: A growth investment strategy focuses on stocks expected to grow at an above-average rate.