Jensen's Alpha
Quantifies the extent to which an investment has added value relative to a benchmark. Jensen Alpha is equal to the investment's average return in excess of the risk-free rate minus the beta times the benchmark's average return in excess of the risk-free rate.
Jones Model
Developed and launched by sociologist and journalist Alfred Winslow Jones in 1949. While traditional mutual fund models took only long positions in stocks, Jones's Model, a limited partnership, combined long positions (in favored stocks) with short positions (in stocks expected to decline) in the same sector, thus insulating or "hedging" the model against market movement. The return earned by the model would depend on the manager's skill in stock selection rather than on the movement of the market. The model thus targeted an absolute return rather than a relative return to the market's performance. For his services Jones charged a performance fee of 20% of realized profits and was required to invest his own capital in the fund. The Jones Model is committed to capital preservation. See Long/Short Equity.
