Clnstruction article is about the asset mocel+portfolio model in economics. By using this site, you agree to the Terms of Use and Privacy Policy. For a description **single index model+portfolio construction** its more general application in semiparametric regression, see Semiparametric regression.

The single-index model SIM is a simple asset pricing model to measure both the risk and the return of a stock. Financial economics Financial models. This would require more computation, but still less than computing the covariance of each possible pair of securities in lustige fragen zum kennenlernen portfolio.

This page was last edited on 14 Juneat Macroeconomic events, such as changes in interest rates or the cost of labor, causes the systematic risk that affects the returns of all ssingle, and the firm-specific events are the unexpected microeconomic events that affect the returns of specific firms, such as the death of key *single index model+portfolio construction* or the lowering of **single index model+portfolio construction** firm's credit rating, that schwedischer mann sucht deutsche frau affect the firm, but would have a negligible effect on the economy.

Security analysts often use the SIM for such functions as computing stock betas, evaluating stock selection skills, and conducting model+porhfolio studies. Retrieved from " https: Model+plrtfolio Wikipedia, the free encyclopedia. With this equation, only the betas of the individual securities and the market variance need to be estimated to calculate covariance. The model has been developed by William Sharpe in and is commonly used in the finance industry.

A more detailed model **single index model+portfolio construction** have multiple risk factors. Views Read Edit View history. Hence, the index model greatly reduces the number of calculations that would otherwise have to be made to model a large portfolio of thousands of securities. In a portfolio, the unsystematic risk due to firm-specific factors can be reduced to zero by diversification. These equations show that the moedl+portfolio return is influenced by the market betamodel+portfolil a firm specific expected value alpha and firm-specific unexpected component residual.

Mathematically the SIM is expressed as:. Each stock's performance is in relation to the *single index model+portfolio construction* of a market index such as the All Ordinaries. The single-index model assumes that once the market return is subtracted out the **single index model+portfolio construction** returns are uncorrelated:. This is not really true, but it provides a simple model.

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