A risk-adjusted performance measure that is the average return on a portfolio over and above that predicted by the CAPM, given the portfolio's beta and the average market return.

This is the portfolio's alpha, in fact the term is sometimes described as Jensen’s Alpha.

Jensen's Measure is calculated by:
p = rp – [rf  + p(rm – rf)]

Where,
p = Jensen’s Alpha
rp = Average Return on the portfolio, actually achieved.
p = Beta of the portfolio
rm = Average Return on the market
rf = Average risk free rate of return

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 riskiness of that portfolio.

For example, if there are two mutual funds that both have a 12% return, a rational investor will want the fund that is less risky. Jensen's measure is one of the ways to help determine if a portfolio is earning the proper return for its level of risk. If the value is positive, then the portfolio is earning excess returns. In other words, a positive value for Jensen's alpha means a fund manager has "beat the market" with his stock pricing skills.

Significance
A higher Jensen’s Alpha is any-day better than a lower figure. A higher figure means that the actual return of the fund is much more than the return that was otherwise expected.