What is the capital market line? Who uses it? Would you use it? Who discovered it? How does the capital market line relate to the security market line?© BrainMass Inc. brainmass.com October 2, 2020, 5:16 am ad1c9bdddf
Capital market line (CML) is the tangent line drawn from the point of the risk-free asset to the risky assets (i.e. market portfolio lies in the optimal risk-return point, with risk being defined as the portfolio's standard deviation). In practice, the U.S. government Treasuries is considered as the risk-free assets while broad equity market index such as S&P 500 is a common proxy for risky assets .
The CML is a fundamental concept in financial studies, and is widely used ...
Introducing the Capital Market Line, with an explanation of its function, relation to the Modern Portfolio Theory and CAPM.