The single-factor model is the simplest form of return estimation models where only one factor is considered.

The most common implementation of the single-factor model is the capital asset pricing model (CAPM) where the single factor is beta, or the volatility of the security’s return relative to the market returns:

E(Ri) – Rf = βi [E(Rm) – Rf].


A more comprehensive content for the concept will be available later.

We will include related examples and CFA questions that are also hyperlinked to the appropriate definitions.