Security characteristic line

The characteristic line is a regression line, which is derived from past values ​​of return on a stock and the return on the market portfolio (Capital Asset Pricing Model). The slope of the characteristic line expressed by the beta factor of ( β -factor). The characteristic curve of a share shows the typical response of their yield as a function of market development.

Equation

With

: Expected portfolio return

: Expected market return

: Regression constant / constant over time yield component of the portfolio

: Regression coefficient / increase of the characteristic line / the portfolio's sensitivity to changes in the market yield

: error term