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Understanding Index Models in Finance by Stacc is a document available to read on EtoBox.
What is Understanding Index Models in Finance about?
The document describes the single-factor index model, which models stock returns as a function of overall market returns plus a stock-specific residual. It identifies two sources of risk: non-diversifiable market risk determined by common market factors, and diversifiable firm-specific risk. The model is estimated using least squares regression, with stock excess returns as the dependent variable and market excess returns as the independent variable. This estimates the sensitivity of each stock to market mo
- Author
- Stacc
- Language
- EN