| market model | Another version of the index model that breaks down return uncertainty into systematic and nonsystematic components.
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| regression equation | An equation that describes the average relationship between a dependent variable and a set of explanatory variables.
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| residuals | Parts of stock returns not explained by the explanatory variable (the market-index return). They measure the impact of firm-specific events during a particular period.
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| scatter diagram | Plot of returns of one security versus returns of another security. Each point represents one pair of returns for a given holding period.
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| security characteristic line | A plot of the excess return on a security over the risk-free rate as a function of the excess return on the market.
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| single-factor model | A model of security returns that acknowledges only one common factor. See factor model.
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| single-index model | A model of stock returns that decomposes influences on returns into a systematic factor, as measured by the return on a broad market index, and firm-specific factors.
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| tracking portfolio | A portfolio constructed to have returns with the highest possible correlation with a systematic risk factor.
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