# 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

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### Asset pricing

**Investment theoryAsset pricesAsset pricing model**

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**

### 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 SharpeSharpe, William Forsyth**

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

### Finance

**financialfinancesfiscal**

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

### All Ordinaries

**All Ordinaries Index**

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

### Systematic risk

**unsystematic risknon-diversifiable risksystematic market risk**

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 500S&P 500 ComponentS&P500**

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)CAPM model**

### Financial economics

**financial economistfinancial economistsfinance**

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

### Outline of finance

**List of finance topicsList of valuation topicsFinance**

### Treynor–Black model

**Treynor-BlackTreynor-Black model**

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

### Estimation of covariance matrices

**Covariance estimationShrinkage estimationestimate of the covariance**

### Valuation (finance)

**valuationinvestment analysisvaluations**

### Price discovery

**price discovery mechanismpricing**