Question: Explain the components of the single index model, linking diversifiable and systematic risk to your answer. What is the Security Characteristic Line and what information

  1. Explain the components of the single index model, linking diversifiable and systematic risk to your answer. What is the Security Characteristic Line and what information does it convey? What is the information ratio and what important information does it convey? Is the full covariance efficient frontier or the index model efficient frontier better?

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