Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Define characteristic line
Expert Solution
Introduction
Characteristic line is a graphical representation of alpha (α) where alpha is the difference between expected return minus required return.
This line is also known as Security’s characteristic line. It shows the relationship between security return and market return. It is used to analyze the performance of securities in the market.
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