# Security Market Line

*Risk & Portfolio — Finicade finance glossary*

The security market line plots expected return against beta, and under CAPM every fairly priced asset sits exactly on it. Assets above the line are underpriced, below it overpriced — which is the formal definition of alpha. Empirically the real line is flatter than theory predicts: low-beta stocks have earned more and high-beta stocks less than CAPM says, the low-volatility anomaly that leverage constraints are thought to cause.

**Also known as:** SML, CAPM line

**Related terms:** [CAPM (Capital Asset Pricing Model)](https://finicade.com/glossary/capm), [Beta](https://finicade.com/glossary/beta), [Capital Market Line](https://finicade.com/glossary/capital-market-line), [Jensen's Alpha](https://finicade.com/glossary/jensen-s-alpha), [Risk Premium](https://finicade.com/glossary/risk-premium)

Source: https://finicade.com/glossary/security-market-line