Single-factor model

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Single-factor model

A model of security returns that acknowledges only one common factor. The single factor is usually the market return. See: Factor model.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Single-Factor Model

A mathematical calculation of the extent to which one macroeconomic factor affect the securities in a portfolio. Single-factor models attempt to account for contingencies like changes in interest rate or inflation. Usually, however, a single-factor model considers how the market return affects the return on the portfolio. See also: Risk analysis, Factor model.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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A chi-square difference test showed that the five-factor model was superior to the four-, three-, two-, and single-factor models. Thus, the five key constructs all have good discriminant validity (Liu, Wang, & Huang, 2017), indicating the feasibility of the structural equation model.
Cortez and Silva (2002) evaluate the overall performance of a sample of 12 National stock funds, during the period April 1994--March 1998, using two single-factor models: an unconditional model and a conditional model with time-varying betas.
The single-factor model presumes that a single market index is enough to explain the fund's investment strategies.
Studies examining the structure of problem behavior by gender have found that single-factor models describe a significant portion of the variance for both male and female participants, but the factor loadings for specific problem behaviors appear to differ by gender (Donovan & Jessor, 1985; Donovan et al., 1988; Farrell et al., 1992; Mitchell & Beals, 1997).
Findings indicated that a single-factor model provided a close fit for these data and compared favorably with three competing two-factor models.
Previous research has found evidence to suggest reverse scoring items perform poorly in single-factor models (Woods, 2006).
When seen collectively, the single-factor model demonstrates a poor fitting model to the data.
These single-factor models cannot be compared statistically with one another directly, but based on Akaike's Information Criterion (AIC) scores, the time model was the most parsimonious of the five.
Estimates ([+ or -]1 SC) of fine root survival and decomposition rates (from MARK) for single-factor models separately evaluating the effects of time period ([[Phi].sub.t]), cohort, (i.e., when the root first appeared; [[Phi].sub.cohort]), age of the root ([[Phi].sub.age]), browsing ([[Phi].sub.browsing]), and site ([[Phi].sub.site]).
Single-factor models may be "good enough" for some applications such as managing portfolios of similar-maturity bonds, but they will result in hedging error when applied to complex securities, such as spread derivatives, for example.
Exhibit 3 illustrates the need for a multi-factor model, as opposed to a single-factor model, for systematic risk.
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