Rationality

In game theory, one of the most common assumptions made is that every player/participant is rational. In its mildest form, rationality implies that every player is motivated by maximizing his own payoff. In a stricter sense, it implies that every player always maximizes his utility, thus being able to perfectly calculate the probabilistic result of every action.

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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 the broad market index, and firm specific factors.


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