[Verse 1]
Picture a market where prices dance free
But there's a line that shows where they should be
Security Market Line cuts through the maze
Expected return for the risk that you take
Beta measures how wild your stock swings
Compared to the market's own mood rings
[Chorus]
SML shows the fair price lane
Risk-free rate plus beta's pain
Alpha measures what you gain
Above or below the pricing chain
Undervalued gems shine bright
Overvalued stocks take flight
[Verse 2]
Start with treasury bills, risk-free and clean
Add market premium for the risks you've seen
Multiply by beta, that's your expected score
If actual return gives you something more
That extra juice is alpha's golden gleam
CAPM reveals what returns really mean
[Chorus]
SML shows the fair price lane
Risk-free rate plus beta's pain
Alpha measures what you gain
Above or below the pricing chain
Undervalued gems shine bright
Overvalued stocks take flight
[Bridge]
Positive alpha screams "buy this treasure"
Negative alpha warns "avoid this pressure"
Plot each stock against the sloping line
Those above it are investment wine
Those below should make you pause and think
Portfolio performance on the brink
[Verse 3]
Jensen's measure captures alpha's truth
Security selection's smoking proof
When managers beat their benchmark's call
Alpha separates the best from all
Risk-adjusted returns tell the tale
Which investments truly tip the scale
[Chorus]
SML shows the fair price lane
Risk-free rate plus beta's pain
Alpha measures what you gain
Above or below the pricing chain
Undervalued gems shine bright
Overvalued stocks take flight
[Outro]
From the line, wise investors learn
Which securities give proper return
Alpha hunting never ends
When CAPM knowledge blends