The single-index model
A) greatly reduces the number of required calculations,relative to those required by the Markowitz model.
B) enhances the understanding of systematic versus nonsystematic risk.
C) greatly increases the number of required calculations,relative to those required by the Markowitz model.
D) a and b.
E) b and c.

Question

Quizplus · Accepted Answer

The single-index model reduces the number of required calculations compared to the Markowitz model, and it also helps in understanding systematic versus nonsystematic risk. Therefore, options A and B are correct, and option D is the best choice. Option C is incorrect as it states that the single-index model increases the number of required calculations, which is not true.

The Single-Index Model