The Capital Market Line

This video discusses the Capital Market Line.

When the volatility and expected return of different portfolios weights is graphed, the line drawn from the risk-free rate such that it is tangent to the efficient frontier is called the Capital Market Line.

Along the Capital Market Line lies a series of efficient portfolios that are combinations of the risky securities with the risk-free investment.

If the assumptions of the Capital Asset Pricing Model hold, then all investors would choose the portfolio on the Capital Market Line that is tangent to the efficient frontier; this is called the tangent portfolio. The tangent portfolio is the market portfolio and it is the portfolio with the highest Sharpe Ratio. This means it provides the highest reward (expected return) per unit of risk (volatility).—
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[Xtbl]

Thanks. Key Point for me was that the CML represents portfolios that include the risk free asset.

[varvarashtembari]

In 5mins everything is explained
so nicely and smoothly. Thnx sir!

[kunalkunde]

CML-return vs. risk graph; tgt to efficient frontier with left end at r_f denotes diff. portfolios as f(proportion)

SML-return vs. beta graph; line denotes diff. portfolios in the CAPM equation

[niranjandhakal]

Thank you very much professor ❤️. Keep posting videos. Knowledge forl all/ you are doing amazing job.

[melonmelong]

u r a genius! having gifted talent in teaching

[astelija]

Clarification about the white line: its the pink dot with varying amounts of riskless asset, the relative weights of the stocks stay the same!

[a.breezy]

so much better explaination than my professor.

[IAP_mkt]

Please help, are we dividing by the standard deviation of the EXCESS market return or by the standard deviation of the market return?

[dawidtaszarek]

Can you explain me what does mean if portfolio lays on the right from CML? Does it make an investor a borrower?

[zennmasterr]

Hey, just a small request/suggestion. In the description, could you also mention the playlist this video is part of. Would be immensely helpful.

[boreum]

Hello, could anyone explain to me, how is it that it's impossible to invest in the CML at other points than in efficient frontier? Is it about CML being just the expectation and Efficient frontier the actual possible portfolios? I can't wrap my head around this.

[teodorodepaulaslemenson]

how do you calculate the expected returns?

[profitusmaximus]

So what is the optimum ratio of risk free assets?

[leenaabufol]

What do I do with minus weights? Anybody I have an exam tomorrow?

[jmnew]

Awesome Video!
Do you have a scientific paper, that summarizes all of your information?😅

[avatarmoney]

Has anybody ever told you that you sound exactly like foodwishes? Amerite?

[giorgionapoli]

All good, thanks, but...risk-free 4%. Seriously? This is cheating! ;P

[rhythmrampal]

Sharpe is reward to variability not volatility..volatility is captured by beta..and it is trenor

[Atillathedumb]

What incredibly frustrating delivery, at one point he repeats himself for 20 seconds.