Anther CML vs Market portfolio question

hi all,

sorry if this has been asked prior, i have searched old questions but cant see that it has.

I wanted to check that i am understanding this correctly.

the CML is different to the CAL in that the CML is combinations of the rf rate and the market portfolio (under homogeneous expectations assumptions).

therefore, as the CML has the highest Sharpe ratio, where the efficient frontier curve of our portfolio ( could be different to the market portfolio) touches the CML line, this produces the optimal weights for our portfolio?

if this is correct, how do points along the CML to the right of the intersection show taking on leverage?

as i write this it doesn’t sound correct - any help is much appreciated.


The CML is a CAL; the CAL with the highest Sharpe ratio.

hi mate thank you for the quick reply.

i cant get my head around- when constructing the efficient frontier - is that different weights of all risky assets? and how is this related to the portfolio used when constructing the CML?

also - would there be a case to hold a portfolio along the efficient frontier to the right of the tangent portfolio? which would essentially be below the CML. I was thinking if you didnt want to take on leverage.

again many thanks