Characteristic line
The characteristic line is a regression line that is derived from past values of the return on a share and the return on the market portfolio ( capital asset pricing model ). The slope of the characteristic line is determined by the beta factor expressed (β-factor). The characteristic line of a share shows the typical reaction of its return depending on the market development.
equation
With
: Expected portfolio return
: Expected return on the market
: Regression constant / return component of the portfolio that is constant over time
: Regression coefficient / slope of the characteristic line / sensitivity of the portfolio with regard to changes in market return
: Disturbance
See also
source
- ↑ Gabler Wirtschaftslexikon: characteristic line . Retrieved July 20, 2011.
Web links
- Characteristic line in the FinanceWiki of the TU Dresden