Talk:Security market line
I rewrote this article because it was essentially taken word-for-word from a copywritten website. The one thing added (a parenthetical "IRR") was used incorrectly. The Internal Rate of Return is used specifially for capital budgeting and is the return required to set an NPV=0; it is not related to the expected rate of return in the SML. 188.8.131.52 07:17, 23 September 2006 (UTC)
Expected return of security rather than market
When you write "It displays the expected rate of return for an overall market as a function of systematic (non-diversifiable) risk (beta)" my first inclination is that this is okay but not very specific.
The CAPM and security market line (SML) offer a way to value an individual security based upon it's relationship to market returns.
Therefore, it might be more correct to say "It displays the expected rate of return for a security as a function of its risk relative to the market's systematic (non-diversifiable) risk (beta)." —The preceding unsigned comment was added by 184.108.40.206 (talk) 10:52, 4 May 2007 (UTC).
Linear Market Line?
I was told back in my first courses in industrial engineering, that the real investment option do not lie on a linear line, but on a concave curve. A portfolio mix (x% of option A and 100-x% of option B) will result in a linear structure of the interest to risk ratio. Thus, nobody would invest in things below this line. As there are more than two investment options (plus their linear combination) in the real world available, these other investment options have to yield slightly better than the direct line between option A and B. In the end the concave capital curve has a decreasing slope, similar to the function f(x) = sqrt(x). This results in diminishing marginal returns of higher risks. Gunnar (talk) 05:18, 30 March 2013 (UTC)