TITLE:
A Bias in Jensen’s Alpha When Returns Are Serially Correlated
AUTHORS:
Jangkoo Kang, Soonhee Lee
KEYWORDS:
Performance Measurement; Jensen’s Alpha; Time-Varying Risk
JOURNAL NAME:
Theoretical Economics Letters,
Vol.3 No.3,
June
13,
2013
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.