For a portfolio with superior performance, its characteristic line will
A) have a more positive slope than the SML.
B) be flat.
C) intercept the SML at the average market return.
D) lie below the SML.

Question

Quizplus · Accepted Answer

A superior performing portfolio will have a characteristic line with a more positive slope than the SML because it indicates that the portfolio has higher returns for the same level of risk compared to the market. This means that the portfolio is outperforming the market and is considered superior.

For a Portfolio with Superior Performance, Its Characteristic Line Will