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
Return on security = alpha + beta * return on portfolio + residual return
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved