The Single Index Model – An Exoteric Choice of Investors in Imbroglio – An Empirical Study of Banking Sector in India

The stock market analysis confined to esoteric jargons and dicey computations often scares the common investor away from such analysis, in spite of having access to personal computer and spreadsheets. The Single Index model though less complicated than Markowitz model fails to attract investors' analytical capability. This paper attempts to identify and explain the simple linear regression aspects of returns of a security in relation to a market index to which the security belongs. The security returns of two banks in India i.e. HDFC Bank and Bank of India are linearly regressed against NSE Nifty Bank Index to arrive at the systematic and unsystematic risks and their volatility to changes in index movements