“Jensen’s Alpha” found in the topic of Portfolio Management and “Abnormal return” found in the topic of Equity. Aren’t say the same concept?

CFAI defines abnormal return as

*The amount by which a security’s actual return differs from its expected return, given the security’s risk and the market’s return.*

So my interpretation of the latter half of the definition basically is expected return calculated by CAPM because of the security’s risk (it’s beta) and the market return. So to me, these two turns are exact the same thing.

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Yes, they’re the same thing.

Financialwar, they are the same thing provided that you are using the same formula to “derive” the return.

Recall that for Jensen’s formula (or CAPM): expected return = alpha + risk free rate + beta * market premium , where alpha is called anormal return here.

But that is just one “hypothesis” of how the market can be constructed under rational Econs (ie risk adverse, maximum utility, etc). Someone could have stated that expected return = profit margin * (cosine(80) + log(5)) - 5 years average depreciation + e. Here, the term “e” is the error term that when you do a regression, it captures all the “information” or abnormal return that the rest of the formula cannot explain. You can replace “e” with alpha and you will see that they both serve the same purpose in the formula, namely, a “plug” to fill the estimation gap.

Or you can say that the Jensen alpha is a special case of abnormal return when the formula is: expected return = alpha + risk free rate + beta * market premium.

hope this helps.