What is the Impact of the S&P 500? by Clifford J. Sherry, Ph.D.
What impact does the variability of the market have on the price behavior of an individual stock? Technicians
often use the Standard & Poor's 500 stock index as a model for the market when calculating beta and alpha. We can use the S&P 500 as a model for the market and attempt to factor out its effect on a stock with a high book-to-price ratio (Ahmanson, or AHM) and a stock with a low book-to-price ratio (Coca-Cola, or KO). They would be considered examples of a value stock and a growth stock, respectively.