Quick Finance Tip – Security Market Line (SML)

Security Market Line is a graphical representation of Capital Asset Pricing Model (CAPM), as beta being on the x-axis and Expected Returns on the y-axis. It is important to note, that the Capital Allocation Line and Capital Market Line do not apply to all securities or assets, but only to efficient portfolios. Conversely, the Security Market Line applies to any security. Therefore, the practical usages for the Security Market Line are more ubiquitous.