Single-Index Model, Multiple-Index Model, and Portfolio Selection

Cheng Few Lee

Chapter 90 in Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives:In 4 Volumes, 2024, pp 2945-2981 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter offers some simplifying assumptions that reduce the overall number of calculations of Markowitz models through the use of the Sharpe single-index and multiple-index models. Besides the single-index model, we also discuss how the multiple-index model can be applied to portfolio selection. We have theoretically demonstrated how single-index and multiple-index portfolio selection model can be used to replace the Markowitz portfolio selection model. An Excel example of how to apply the single-index model approach is also demonstrated.

Keywords: Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting (search for similar items in EconPapers)
JEL-codes: G1 G11 G12 G3 M41 M42 (search for similar items in EconPapers)
Date: 2024
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