The relationship between excess returns and the portfolio beta is represented by the market line.

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The market line, also known as the security market line (SML), represents the relationship between excess returns (or required returns) and the systematic risk of a portfolio, which is measured by its beta. It shows what return investors should expect for a given level of risk, as determined by the market risk premium and the beta of the portfolio. Thus, the market line is a graphical representation of the capital asset pricing model (CAPM), which predicts that the expected return on an asset or portfolio is equal to the risk-free rate plus the beta of the asset or portfolio multiplied by the market risk premium.

The Relationship Between Excess Returns and the Portfolio Beta Is