Corporate Finance: Instructor\'s Manual Applied Corporate Finance

Aswath Damodaran 123

Disney’s Beta Calculation: A look back at 1997 - 2002

Jensen’s alpha = - 0. 39 % -

0. 30 ( 1 - 0. 94 ) = - 0. 41 %

Annualized = ( 1 -

. 0041 )^ 12 - 1 = - 4. 79 %

If you go back 12 months, the conclusions on Disney’s performance would

have been much more negative.

Jensen’s alpha = -0.39% - 0.30 (1 - 0.94) = -0.41%! Monthly riskfree rate

during the period is 0.30%)

Annualized Jensen’s alpha = (1-.0041)^12-1 = -4.79%