I’m studying “Portfolio risk and return”. I think i understand the concetps about CAL, CML and efficient frontier, but there are somo things i’m confused:
If CML represents the market expectations and CAL represents individual expectations, should we have 2 different efficient frontiers?:
1 efficient frontier constructed with the market expectations
1 efficient frontier constructed with individual/investor expectations
If this is not correct, and there is only one efficient frontier, always the CML is higher than any CAL. So why an investor would select a portfolio in the CAL, if any point in the CML for the same level of risk has a better expected return?