DEFINITION of 'Capital Market Line  CML'
A line used in the capital asset pricing model to illustrate the rates of return for efficient portfolios depending on the riskfree rate of return and the level of risk (standard deviation) for a particular portfolio.
VIDEO
BREAKING DOWN 'Capital Market Line  CML'
The CML is derived by drawing a tangent line from the intercept point on the efficient frontier to the point where the expected return equals the riskfree rate of return.
The CML is considered to be superior to the efficient frontier since it takes into account the inclusion of a riskfree asset in the portfolio. The capital asset pricing model (CAPM) demonstrates that the market portfolio is essentially the efficient frontier. This is achieved visually through the security market line (SML).

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Standard Deviation
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Efficient Frontier
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Modern Portfolio Theory  MPT
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Capital Asset Pricing Model  CAPM
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Characteristic Line
A line formed using regression analysis that summarizes a particular ...

Fundamental Analysis
Explaining the Capital Market Line
The capital market line (CML) depicts the level of additional return above the riskfree rate for each change in the level of risk. 
Bonds & Fixed Income
Understanding The Sharpe Ratio
This simple ratio will tell you how much that extra return is really worth. 
Mutual Funds & ETFs
Introduction To Fundamentally Weighted Index Investing
If you believe the market smiles on those who focus on value, growth or income, this vehicle may be for you. 
Mutual Funds & ETFs
Strategies For Determining The Market's True Worth
Learn the strengths and weaknesses of passive and active management when trying to uncover the overall market's worth. 
Fundamental Analysis
The Capital Asset Pricing Model: An Overview
CAPM helps you determine what return you deserve for putting your money at risk. 
Fundamental Analysis
Catch On To The CCAPM
The consumption capital asset pricing model smoothes over some of CAPM's weaknesses to make sense of risk aversion. 
Options & Futures
Financial Concepts
Diversification? Optimal portfolio theory? Read this tutorial and these and other financial concepts will be made clear. 
Technical Indicators
Explaining Autocorrelation
Autocorrelation is the measure of an internal correlation with a given time series. 
Term
Public Goods & Free Riders
A public good is an item whose consumption is determined by society, not individual consumers. 
Investing Basics
What Does In Specie Mean?
In specie describes the distribution of an asset in its physical form instead of cash.

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