first, if the formula_13 is positive (as is expected), the adjusted beta is greater when the capm beta is smaller than 1 and vice versa. thus, it is expected that the risk premium will be greater than predicted by the capm for securities with a beta less than one and smaller for securities with a beta greater than 1. this results in a less steep security market line (sml). the ratio of formula_14 may be greater than one and thus likely has a significant economic effect. this may be an explanation for the average negative alpha of high-beta securities and positive alpha of low-beta securities that have been empirically found.