Characteristic line
The market model applied to a single security; a regression of security returns on the benchmark return. The slope of the regression line is a security's beta.
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characteristic line
A straight line on a graph that shows the relationship over time between returns on a stock and returns on the market. The line is used to illustrate a stock's alpha (the vertical intercept) and beta (the line's slope) and to show the difference between systematic and unsystematic risk.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.