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Kelly Z

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I was reading my own notes and noticed some contradictary points, can someone fix the wrong one(s) for me?
  1. zero beta: no systematic risk
  2. zero beta CAPM results in SML
  3. Slope of SML is market risk premium that compensate the systemetic risk.
Help please!
Thank you.
 
Kelly Z wrote:
I was reading my own notes and noticed some contradictary points, can someone fix the wrong one(s) for me?
  1. zero beta: no systematic risk
  2. zero beta CAPM results in SML
  3. Slope of SML is market risk premium that compensate the systemetic risk.
Help please!
Thank you.
Click to expand...
Not sure point 2 is correct.
The SML is a graphical representation of the equation provided by the CAPM.
It graphs the expected return of a security as a function of the beta.
 
question on number 1, can you ever have “no” systematic risk? I know that systematic risk is measured by the covariance of the returns compared to the return of the market portfolio and is a component of total risk, i guess i never thought of it in having “no” risk. Any insight would be great
 
It’s possible (in theory, at least) to create a zero-beta portfolio.
Its expected return should be the risk-free rate.
 
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