Question: Consider a security market line (SML) on a plot where y-axis is expected returns and x-axis is beta. If a stock A is located below
Consider a security market line (SML) on a plot where y-axis is expected returns and x-axis is beta. If a stock A is located below the SML on the plot, what would be the vertical distance between the stock A and the SML, i.e., actual average return of stock A minus the expected return under the CAPM?
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