Security Market Line


Also found in: Acronyms, Encyclopedia, Wikipedia.

Security market line

Line representing the relationship between expected return and market risk or beta. The slope of this line is the risk premium for beta.

Security Market Line

The linear relationship between expected asset returns and betas posited by the Capital Asset Pricing Model.

Security Market Line

In Markowitz Portfolio Theory, a line on a chart representing the capital asset pricing model. The security market line plots risk versus expected return of the market. The security market line is a useful tool in determining whether a given security is undervalued and/or a market outperform. If a security plots the security market line, it indicates a higher expected return for a given level of risk than the market as a whole.

security market line

A line used to illustrate the relationship between risk and return for individual securities. The security market line shows a positive linear relationship between returns and systematic risk as measured by beta.
References in periodicals archive ?
The model indicates that the best possible portfolio is the market portfolio, which can be found on the Security Market Line (SML) with a beta coefficient of one.
Security Market Line (SML) is the line that results, when we plot predicted returns and betas coefficients, is clearly of some significance, so it is useful to provide it with a name.
This is the extended equilibrium market equation and the security market line of the classical capital asset pricing model of Merton (1987) in continuous time.
This is the corresponding equilibrium market equation and the continuous time security market line of the intertemporal capital asset pricing model with incomplete information.
Figure 2 puts these estimates of the risk-level of R&D in the context of the Security Market Line showing the risk and return from various portfolios of the stock market and T-Bills.
Risks associated with the range of R&D returns asserted by Gibbons can be estimated using the Security Market Line (SML).
Ross, 1985, "Differential Information and Performance-Measurement Using a Security Market Line", Journal of Finance, 40:383-399
Full browser ?