Portfolio Theory

Security Market Line

Definition

What is Security Market Line?

A line showing the CAPM relationship between expected return and beta.

Example in practice

A security above the line appears to offer more return than its beta implies.

Keep learning

A model linking expected return to the risk-free rate, market risk premium, and an asset's beta.

The set of portfolios offering the highest expected return for each level of risk under stated assumptions.

The portfolio with the lowest expected variance among the available combinations.

A fraud that pays earlier participants using money from newer participants rather than genuine investment profits.

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