smartpants

I think it is assumed that the zero-beta portfolio has a higher expected return than the risk-free asset. Because the expected return is higher, that shifts the y-intercept higher.

sgupta0827

So how does that translate into high intercept on the y axis and flatter slope for the SML?

studyn

The intercept at the Y axis is the zero beta on the X axis. That's the risk free rate with zero systemic risk. Anything further out to the right has positive beta and some systemic risk.

- Robert

Londonrocks

Any portfolio that does not have systematic risk or beta =0. Put it another way, does not vary with market portfolio.
E.g., bank deposit, CD,..
Mind you, the portfolio can still have non-systematic risk, e.g., market neutral hedge fund which both go long and short closely-related stocks can have zero beta, but still has a lot of non-systematic risks.