Single-index model

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Single-index model

A model of stock returns that decomposes influences on returns into a systematic factor, as measured by the return on the broad market index, and firm specific factors. Related: Market Model
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Single-Index Model

The relationship between a security's performance and the performance of a portfolio containing it. The market model states that the security's performance is related to its portfolio's performance, according to its beta. It is calculated as follows:

Return on security = alpha + beta * return on portfolio + residual return
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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References in periodicals archive ?
To evaluate the performance of the bond funds that compose our sample we consider both models used in Silva, Cortez and Armada (2003a): a single index model and a 3-index model.
By comparing the results, we can observe that, in the context of the single index model, when conditional alphas are considered instead of unconditional alphas, the evidence of performance consistency increases slightly.
The persistence of European bond fund performance: does conditioning information matter?
Therefore, when the single market proxy used does not represent the whole market but only part of it, the APT multiple benchmarks may explain the sensitivity of the single index model. Indeed, EGDH employ a multifactor approach to control for the omitted asset and show that the Jensen's alpha becomes insignificant after controlling for the small-firm portfolios and the bond portfolio.(16)
The sensitivity in tests of the efficiency of a portfolio and portfolio performance measurement
Proenca, 2000, A Bootstrap Test for Single Index Models, Unpublished manuscript, Humboldt Universitaet, Berlin.
On the revelation of private information in the U.S. crop insurance program

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