Investments, tenth edition

  The Single-Index-Model Input List 

 If the portfolio manager plans to compile a portfolio from a list of  n  actively researched firms 

plus a passive market-index portfolio, the input list will include the following estimates:

    1.  Risk premium on the S&P 500 portfolio.  

   2.  Standard deviation of the S&P 500 portfolio.  

   3.   n  sets of estimates of (a) beta coefficients, (b) stock residual variances, and 

(c) alpha values. (The alpha values, together with the risk premium of the S&P 

500 and the beta of each security, determine the expected return on each security.)