Security market line / Fundamentals of investments / Episode 9

The security market line (SML) depicts the linear relationship between expected return and beta as predicted by CAPM. In this tutorial, we discuss the SML equation, explain how it differs from the capital market line (CML), and demonstrate the arbitrage opportunities that exist when a stock lies above or below the security market line.

0:00 Introduction
0:48 What is the security market line?
2:51 Capital market line vs security market line
7:01 Exploiting arbitrage opportunities

See also our detailed post on this topic:
www.initialreturn.com/security-market-line/

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