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Fill in the blanks: According to the single-index model: = β * + + e.

Fill in the blanks: According to the single-index model: = β * + + e.

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Expert Solution

Answer: = β * Rm + α + e

According to Single- Index Model, Stock Prices are related to the market index. This relation can be used to estimate the return of stock.

Return of Stock (R) = β * Rm + α + e.

where, Rm = Return on Market Index,

e = error term,

α = alpha coefficient

β = Beta coefficient

jeff jeffy answered 2 years ago
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