Consider an economy with assets with return processes $A$, $B$, $C$, $D$. Consider a weighted index with return process $I=aA + bB + cC + dD$ where $a,b,c,d$ are coefficients, and $a+b+c+d = 1$. ...
Assume we decompose the daily (log) returns of a stock as beta times market movement plus an idiosyncratic part. If this is done ex-ante, what proportion of the variance is explained by the market ...