
Benoit,
 
Jensen alpha = CAPM alpha
 
once you get your beta(s) with OLS, alpha = mean(y) - beta*mean(x) where y are your dependent variable, x your independent variable...so y would be your portfolio's excess return and y the market's excess return
 
& you are right, jensen alpha is a return, so need annualization, see previous tread
 
Do not get last question...just use the whole time series to compute the alpha
 
Hope this helps
 
Julien
> Date: Mon, 27 Oct 2008 14:01:01 +0100> From: Benoit.Schmid@unige.ch> To: r-sig-finance@stat.math.ethz.ch> Subject: Re: [R-SIG-Finance] Returns used to compute the alpha and the beta> > Good morning,> > Brian G. Peterson wrote:> > Classic CAPM alpha will not change based on the periodicity, as it > > measures the _portion_ of a set of returns that are not attributable > > to the benchmark return, and should be calculated with the highest > > regular periodicity available. Return.excess may calculate what you > > are referring to as "alpha" if by alpha you mean returns over a > > benchmark return, in which case you would first run Return.excess > > using the benchmark return as the parameter 'rf' and then cumulate > > your daily log returns to get a cumulative return over some other > > periodicity (annual in your query).> If I look at the Jengsen alpha définition, it is a linear combination of > return.> Therefore it is a return.> Therefore the daily Jengsen alpha is not equivalent as the yearly > Jengsen alpha.> Am I right?> If not, what I am missing?> > What you are explaining to me is that The alpha is not the jengsen alpha> because it "measures the _portion_ of a set of returns".> By portion, you mean that it is a ratio of returns and not an absolute > return.> Am I right?> > Thanks in advance for your answer.> > _______________________________________________> R-SIG-Finance@stat.math.ethz.ch mailing list> https://stat.ethz.ch/mailman/listinfo/r-sig-finance> -- Subscriber-posting only.> -- If you want to post, subscribe first.
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