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The plotted relationship between expected return and the level of systematic risk is called the security market line (SML). The equation of the SML is ER = R_f + (R_M - R_f)Beta. Whatever your view of risk, the riskier the security, the greater the expected rate of return an investor will demand to buy and hold the security.fficeffice" />

·         Movement along the SML demonstrates a change in the risk characteristics of the individual investment.

·         Changes in the slope of the SML demonstrate a change in the attitudes of investors toward risk.

·         Parallel shifts in the SML demonstrate changing market conditions, such as changing inflation expectations or tightening of the money supply (a change in the real risk free rate).