Question

What should be able to construct and use the Security Market Line. have a basic understanding...

What should be able to construct and use the Security Market Line.
have a basic understanding of index models and the Fama-French model.

understand the arbitrage pricing theory (APT) and to be able to use this theory to identify mispriced securities.

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Answer #1

security market line:-

  1. security market line is a security market line drawn on charts using Capital Asset pricing model.
  2. security market line shows the expected return and the returnr from other securities in the market.

Security market line shows the systematic and other risks of variouv securities in a market at a given pointpof time.

Indexes are used to analyse the security market and the securities in the market.

Here below wew have given fama french model and arbitrage pricing theory

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