For portfolio of 40 stocks to adopt Sharpe index model, the bit of information needed are

Question

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The Sharpe index model requires the following information for a portfolio of 40 stocks: the expected return and beta for each stock (which totals 80 bits of information), the risk-free rate (1 bit), and the expected return on the market portfolio (1 bit). Additionally, the covariance of each stock with the market is needed, but since beta is used instead (which incorporates this information), no separate covariance data is needed. However, the variance of each stock is also required, adding 40 more bits of information (one for each stock). Therefore, the total information needed is 80 (for expected return and beta) + 1 (risk-free rate) + 1 (market return) + 40 (variances) = 122 bits of information.

For Portfolio of 40 Stocks to Adopt Sharpe Index Model