hi i have a confusion about what conclusion I can draw regarding the pricing from the Capital market line and security market line.
As far as I know, if an asset that is lying below the SML is overpriced while above the SML is underpriced, which makes sense to me. However, why can't I draw such conclusion from the CML?? I guess it may because one is measuring beta while the other concerns standard deviation... What does "fairly-priced" mean??? Do we only need to concentrate on systematic risk (since it reflects from SML) on pricing??
Thank you!