Security characteristic line (SCL) is a regression line,Characteristic Line plotting performance of a particular security or portfolio against that of the market portfolio at every point in time. The SCL is plotted on a graph where the Y-axis is the excess return on a security over the risk-free return and the X-axis is the excess return of the market in general. The slope of the SCL is the security's beta, and the intercept is its alpha.Security Characteristic Line
Formula
where: αi is called the asset's alpha (abnormal return) βi(RM,t – Rf) is a nondiversifiable or systematic risk εi,t is the non-systematic or diversifiable, non-market or idiosyncratic risk RM,t is the return to market portfolio Rf is a risk-free rate
See also Security market line Capital allocation line Capital market line Modern portfolio theory
References
External links Security characteristic line calculator CAPM and the Characteristic Line Chapter 7 CAPM {link doesn't work} Chapter 13 {link doesn't work}