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

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
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To obtain an unconditional risk-adjusted measure we use the single index model, which regresses portfolio excess returns on a benchmark portfolio excess returns, usually a market index.
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.
The persistence of European bond fund performance: does conditioning information matter?
Proenca, 2000, A Bootstrap Test for Single Index Models, Unpublished manuscript, Humboldt Universitaet, Berlin.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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