In a perfectly efficient market, all assets would plot on the Security Market Line.

Question

Quizplus · Accepted Answer

The Security Market Line represents the relationship between risk (measured by beta) and expected return in a market. In a perfectly efficient market, all assets would have prices that reflect all available information, so their expected returns would be in line with their level of risk as measured by beta, and they would all plot on the Security Market Line.

In a Perfectly Efficient Market, All Assets Would Plot on the Security