Security Market Line

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Security Market Line

Рет қаралды 152,256

Ronald Moy, Ph.D., CFA, CFP

Күн бұрын

Пікірлер: 77

@dr123hall 8 жыл бұрын

Gem of example and explanation of what is often a complex and unnecessary mystery in finance classes! Bravo!!

@PankajSingh-hn1th 3 жыл бұрын

Fantastic explanation by u. Other are creating the hell outof this complex topic. I will recommend only your videos to my cfa pursuing friend's. 😅👍👍☺

@AnnaHaTexas 3 жыл бұрын

I is a beautiful sharing. I finally got it

@ha7wirebrewsky 9 жыл бұрын

Fucking glorious, quality work.

@n.subramanian4517 2 жыл бұрын

Really really amazing work, thank you

@santybest8222 7 жыл бұрын

If an asset is priced above the SML, and thus undervalued, it should be bought? and If it is priced below the SML, and thus overvalued, it should be sold? Right?

@RonaldMoy 7 жыл бұрын

That is correct.

@Covid-wj1km 3 жыл бұрын

Thanks for the precise and concise video.

@richardgordon 4 жыл бұрын

Thanks for an incredibly well explained video!

@silviapaul5192 Жыл бұрын

I appreciate u.i have learned a lot

@greensong6724 5 жыл бұрын

This video helps me a lot thank you Ronald!

@brendaj1265 7 жыл бұрын

This video is extremely helpful. Excellent explanation!

@frankkkmate4267 3 жыл бұрын

thank you so much sir！

@traceyn.6004 9 жыл бұрын

Such a excellent video- you explain the security market line so well...Thank you!!

@targa5824 8 жыл бұрын

really well explained! thank you!

@user-ul5mf9jg1c 4 жыл бұрын

Very very very helpful!!! Thank you so much!!!

@raynineteen1148 5 жыл бұрын

Excellent explanation of SML! Thank you!

@muhammadidrees42 8 жыл бұрын

Excellent video, explaining SML.

@Covid-wj1km 3 жыл бұрын

Tesla: Hold my beer

@agnidipsadhak3581 7 жыл бұрын

Excellent video

@sandesh4924 4 жыл бұрын

Thank you sir

@Alex-cg8qg 8 жыл бұрын

clear and to the point.big help, thank you

@tebogophasha1905 6 жыл бұрын

Thank you so much for such an insightful video.

@Techinsane011 10 жыл бұрын

Thanks for the simplistic explanation.

@correyretzloff6421 6 жыл бұрын

Fantastic presentation

@richaarora7626 6 жыл бұрын

You are amazing! Thank you.

@skkobe 10 жыл бұрын

Thank you for this nice video. Make me know this topic quickly and clearly.

@Heaven-mg4pv 10 ай бұрын

Sir stocks that are undervalued giving higher return relative to the risk i’m gonna take, so my question is if i m getting higher return while taking a lower level of risk isn’t is good for me? Then why this particular security is considered to be undervalued & why i should not invest in it?

@pfanomakhuvha2192 5 жыл бұрын

Fantastic! Thank you!

@lamiaabdulkhalek9720 7 жыл бұрын

Thanks alot,much appreciation.

@user-nm3yp6ch4g 8 жыл бұрын

Best explanation ever

@solomon3321 Жыл бұрын

2:03 on the SML graph. shouldn't the horizontal axis be labelled beta of i instead of beta of the market. since SML is a measure of a single security?

@RonaldMoy Жыл бұрын

It's not labelled beta of the market. The beta of the market is 1 and that is one of the points on the graph.

@solomon3321 Жыл бұрын

@@RonaldMoy thank you sir

@MrBish435 4 жыл бұрын

You are amazing! I loved this tutorial! it was exactly what I wanted to learn. Not many explained the stock value using SML properly!!!

@MarioMadrona 9 жыл бұрын

Thank you! Transparent clear!

@aadamjawad9510 3 жыл бұрын

why does it say at 0:34 that sml also includes individual securities or portfolios - so are the 2 the exact same except one as SD on x axis and other has beta ?

@stefankuzmanov6529 10 жыл бұрын

good explanation. thank you

@doraemonfanclub9830 9 жыл бұрын

Nice video! I understood SML!

@faizantheripper 8 жыл бұрын

thanks for a great guide ..

@battlegroundmaster1875 7 жыл бұрын

thank you for the great lectureSML pass on the Tbill and S&P500 when we draw it on the graph since Tbill's beta is 0 and S&P500's beta is 1? or we have to choose the line passing on many portfolio most on the scattered graph?

@RonaldMoy 7 жыл бұрын

It's a straight line so you only need 2 points. Theoretically, all securities should lie on the line. If they aren't on the line they are not priced correctly. If a security is overpriced, investors will sell it and drive the price down. If it's underpriced, investors will buy it and drive the price up. In equilibrium, all securities should fall on the line.

@battlegroundmaster1875 7 жыл бұрын

Ronald Moy how about average return so like s&p500 index could be average return? Or among the scattered points do I have to draw line on the many points as much as I can with straight line?

@KcoolKidd97 7 жыл бұрын

Why does prices and returns move in opposite directions? I understand that if an asset's expected return is above the SML, it is undervalued. But, investors will buy up this asset and the price will increase and the expected return will then decrease; thus bringing the asset's return to the level of the security market line. Why does the expected return decrease though? After spending some time thinking about it, I came up with the following: Expected Return = Dividend Yield + Capital Gains yield. If the price increases, the dividend yield will decrease because the bottom of the fraction gets larger; thus decreasing the yield. However, the capital gains yield will also increase because you are receiving capital gains because the price went up. Therefore, the capital gains nullifies the the decreased yield. The return then does not actually decrease. So my thinking does not make sense. Can anyone help?

@RonaldMoy 7 жыл бұрын

If you pay too high a price, your return will be lower and vice versa.

@kydkidd 6 жыл бұрын

Hi Ronald, I have a question for this. Is the beta a result from regression or you calculate it based on the covariance-variance formula? Thank you.

@RonaldMoy 6 жыл бұрын

Technically, it's the same thing. The covariance/variance formula is how you compute the slope coefficient in a regression.

@kydkidd 6 жыл бұрын

Thanks for your explanation. I was confused by this for a long time. Now, you solved this problem for me. Appreciate your reply. Best.

@immerfestedruff 7 жыл бұрын

Hi, at 6:11: Where do I get these 12%of asset A from? Did you assumed them, or can they be calculated in any way out of the former terms?

@RonaldMoy 7 жыл бұрын

I just made it up to illustrate an underpriced security, one that has a return that exceeds what the SML says it should have given its risk.

@abdo-eh3eg Жыл бұрын

What's means that the slope of SML is negative?

@RonaldMoy Жыл бұрын

A negative slope would mean people expect a lower expected return as systematic risk increases. Something that is not consistent with our beliefs about risk and return.

@kygokhan 10 жыл бұрын

thank you!

@michaelfreeman4460 7 жыл бұрын

What about the shifts of the SML?

@RonaldMoy 7 жыл бұрын

If the risk free rate increased, but the expected return on the market stayed the same, the intercept term would be higher (risk free rate) and the SML would also become less steep because the slope, which is the market risk premium (E(Rm) - Rf) would be smaller.

@anastasiiabimendieva6549 9 жыл бұрын

great video very helpful thank you

@ReddDevil1982 7 жыл бұрын

Very good explanation ! Could you make an another clip about estimating the beta faktor? Thanks ! Greetings from Germany

@nagarajugatla7239 4 жыл бұрын

No clarity voice and under ursu tag is covered the graph

@wspsandgvss 7 жыл бұрын

thanks a lot

@SolutionsWithin 8 жыл бұрын

I thought Beta was a slope; is that for the CAPM formula? Or is the CAPM formula the same as the SML formula. Thanks in advance.

@RonaldMoy 8 жыл бұрын

Beta is a slope when you plot the return of a stock against the return of the market. However, you can now plot it as the independent variable in another graph with the expected return of the asset and you get the security market line.

@SolutionsWithin 8 жыл бұрын

+Ronald Moy Okay. Thanks so much. I have a big project due at midnight. I just plotted my SML and it says I have to plot the Tangency Portfolio point on there too (which I did on the previous graph when I did the CML graph. To determine beta of the portfolio, I took the betas of each stock and multiplied them by their perspective weights (as determined by my Markowitz optimization set up on excel) and then summed up all the weighted betas, but the total is 0.42. Yet, now that I watched your video, I'm thinking the beta of the Tangency portfolio should always be 1? and therefore, now that I am putting it on the SML graph, it should be on the SML line at beta =1 and the same E[r] as when I graphed it on the CML graph. I don't know if my method for determining beta of a portfolio of stocks that I know the betas of, is wrong, or what. Thanks for any more help you can give me : )

@12rajantiwari 8 жыл бұрын

You can determine portfolio through other way. On the CML take the beta of a portfolio whose Share ratio is highest, and that is going to be your portfolio beta on SML too.

@SolutionsWithin 8 жыл бұрын

RAJAN TIWARI Thank you Rajan!

@jithinjoykochumalayil8442 6 жыл бұрын

are we comparing the expected rate of return calculated under capm Vs actual return to determine whether the security is under priced or over priced. some defined it as difference between estimate returns and expected return under capm

@RonaldMoy 6 жыл бұрын

It could be either. The SML is just giving you a benchmark for comparison. Either for what you believe the return will be or what it actually was.

@jithinjoykochumalayil8442 6 жыл бұрын

Thankx . wat z d difference between expected and estimated return in this context

@Jordan-md3uc 8 жыл бұрын

Why wouldn't you want to buy an undervalued asset/portfolio? Your return is higher than expected for the given amount of risk, wouldn't this make it more attractive to investors? Any help/explanation would be appreciated - Confused university student

@RonaldMoy 8 жыл бұрын

+Kyle Mcneil You're right, you would buy an undervalued security because the return is greater than what you should receive for the risk you are taking. Points over the SML are undervalued.

@AbdullahRK 8 жыл бұрын

+Ronald Moy Thank you for the video, and the correction in here at 8:14 you said shouldn't buy undervalued asset.

@RonaldMoy 8 жыл бұрын

+AbdullahRK I listened again and I think I said you should buy it, but thanks for watching and commenting.

@Jordan-md3uc 8 жыл бұрын

+Ronald Moy At 8:14 you said "you don't want to buy these", but yes I understand the concept now. Sorry, was just cramming for an exam. Thanks for a clear explanation.

@sethm3856 6 жыл бұрын

He says "You'd want to buy these" - "you would want to buy these"

@jonnaflores1503 6 жыл бұрын

If the beta is missing and the only given are E(Ri) & Var(Ri) how will get it.

@RonaldMoy 6 жыл бұрын

If you have the variance for the market and the covariance between the stock and market you can compute the beta. If you know the expected return of the stock and the market and the risk free rate, you can also compute beta.