giorgio10

Let's say:

The market (maybe portfolio) return as indicated (predicted) by the SML is 15%

The security, given its beta (let's say it matches the market beta, 1.0), has an expected return right now of 18%. Investors will buy the stock so that the expected return decreases.

Assume that you would calculate expected return as per the dividend discount model - at which case when the price of the security increases in conjunction with investors purchasing it - the expected return decreases. Investors will want to purchase it until the price reaches a point where the expected return is equal to the SML.