Single-index model

single index model
The single-index model (SIM) is a simple asset pricing model to measure both the risk and the return of a stock.wikipedia
16 Related Articles

Asset pricing

Asset pricesAsset pricing theoryasset price
The single-index model (SIM) is a simple asset pricing model to measure both the risk and the return of a stock.

Alpha (finance)

alphaexcess returnoutperform market averages
\alpha_i is the stock's alpha, or abnormal return
The alpha coefficient (\alpha_i) is a parameter in the single index model (SIM).

Stock

equitiesequityshares
The single-index model (SIM) is a simple asset pricing model to measure both the risk and the return of a stock.

William F. Sharpe

William SharpeBill Sharpe
The model has been developed by William Sharpe in 1963 and is commonly used in the finance industry.

All Ordinaries

Each stock's performance is in relation to the performance of a market index (such as the All Ordinaries).

Systematic risk

non-diversifiable risksystematic market riskunsystematic
To simplify analysis, the single-index model assumes that there is only 1 macroeconomic factor that causes the systematic risk affecting all stock returns and this factor can be represented by the rate of return on a market index, such as the S&P 500.

Stock market index

stock indexindexstock market indices
To simplify analysis, the single-index model assumes that there is only 1 macroeconomic factor that causes the systematic risk affecting all stock returns and this factor can be represented by the rate of return on a market index, such as the S&P 500.

S&P 500 Index

S&P 500 ComponentS&P 500S&P
To simplify analysis, the single-index model assumes that there is only 1 macroeconomic factor that causes the systematic risk affecting all stock returns and this factor can be represented by the rate of return on a market index, such as the S&P 500.

Risk factor (finance)

risk factorsrisk factor
A more detailed model would have multiple risk factors.

Capital asset pricing model

CAPMCapital Asset Pricing Model (CAPM)asset appropriate discount rate
* Capital asset pricing model

Financial economics

financial economistfinancial economistsfinance
Whereas the above extend the CAPM, the single-index model is a more simple model.

Treynor–Black model

Treynor-Black
(This is the so-called Diagonal Model of Stock Returns, or Single-index model due to William F. Sharpe).

Estimation of covariance matrices

Shrinkage estimationcovariance estimationestimate of the covariance
2) the single-index model;