S&P 500

Type: Equity market index Coverage: 500 largest US publicly traded companies Use in CFA: Primary benchmark for US equity returns

Role in Quantitative Methods

• Used as independent variable ($X$) in regression examples
• ABC stock regression: $\widehat{ABC}=-2.3\%+0.64\times \text{S\&P 500 excess return}$
  • Slope = 0.64 → ABC moves 0.64% for every 1% move in S&P 500
  • This slope is essentially the stock’s beta ($\beta$)
• Used to demonstrate correlation, covariance, and regression analysis

Referenced In

• M10 — Regression (ABC/S&P 500 example throughout)
• M05 — Portfolio Math (portfolio expected return example)
• M10 Practice (Stellar Energy/S&P 500)