alpha. If additional factors were to be added (such as momentum) one could ascertain a 4-factor alpha, and so on. If Jensen's alpha is significant and positive, then the strategy being considered has a history of generating returns on top of what would be expected based on other factors alone. For example, in the 3-factor case, we may regress momentum factor returns on 3-factor returns to find that momentum generates a significant premium on top of size, value, and market returns. See also Alpha (investment) Modigliani risk-adjusted performance Omega ratio Sharpe ratio Sortino ratio Treynor ratio Upside potential ratio External links Evaluating Mutual Fund Performance Calculating Jensen Alpha online - Portfolio calculator References Financial markets Investment indicators Mathematical finance Portfolio theories