The Capital Market Line

Рет қаралды 143,637

5 жыл бұрын

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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Пікірлер: 44

@Xtbl6681 5 жыл бұрын

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

@nasseralkmim4394 3 жыл бұрын

yes, and also you have to extend the idea of efficient portfolios (Markowitz) to an equilibrium condition where all market is held (supply and demand), otherwise you can not conclude that the tangent portfolio is the market portfolio. It's easy to miss that insight because of the simplicity of the model.

@niranjandhakal265 4 жыл бұрын

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

@varvarashtembari9451 4 жыл бұрын

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

@rutvimehta4308 5 жыл бұрын

very helpful. thank you!

@melonmelong424 Жыл бұрын

u r a genius! having gifted talent in teaching

@5astelija75 4 жыл бұрын

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

@hassangabobeh7404 4 жыл бұрын

Thank you for that 🙏🙏🙏

@wjr6635 3 жыл бұрын

thanks from France

@farahnazafshar1287 Жыл бұрын

Thanks for your amazing video

@teardownthewa11 11 ай бұрын

Very helpful!

@hcapppp 2 жыл бұрын

Great video!

@dawidtaszarek4072 2 жыл бұрын

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

@zennmasterr 4 жыл бұрын

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

@harikrishnavaleti1159 5 жыл бұрын

Thank you..

@Edspira 5 жыл бұрын

No problem!

@rustydagon598 3 жыл бұрын

Thanks McLaughlin!

@Edspira 2 жыл бұрын

No problem Rusty! I hope life is treating you well!

@IcemanNerd 4 жыл бұрын

thanks for this video

@Edspira 4 жыл бұрын

No problem!

@user-dz3xh1ik5m 13 күн бұрын

Life saver

@minkubinku 3 жыл бұрын

thank you very much

@Edspira 3 жыл бұрын

Glad it helped!

@drfairoozashareff6737 3 жыл бұрын

So nice

@IAP_mkt 3 ай бұрын

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

@AlaraDincYT 3 жыл бұрын

tnx!

@boreum789 2 жыл бұрын

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.

@sylphsh 2 жыл бұрын

Capital allocation line (CAL) is added to the efficient frontier. Points on capital allocation line (CAL) indicates borrowing (or lending money) to buy more (or less) of the optimal risky Portfolio. CML and market portfolio is special case of CAL and optimal risky portfolio.