Hi all, first post. These boards are great. I have a couple of questions on Jensen’s alpha that I wanted to shoot out here.

When people in the investment industry simply say alpha, are they talking about Jensen’s alpha?

Second, the equation for J’s alpha is: a = (Rp - Rf) - B(Rm - Rf)

Intuitively, here is how Investopedia explains this: “The basic idea is that to analyze the performance of an investment manager you must look not only at the overall return of a portfolio, but also at the risk of that portfolio. For example, if there are two”

So since B measures systematic risk, why is it not included in the first term of the equation, (Rp - Rf). In other words, why would you adjust the expected market return premium by it’s risk, but not the portfolio’s expected return?

I must not be understanding this correctly.