# M^2, Sharpe, Treynor - >CAL, CML, SML

Can someone confirm:

Treynor:

ERp - Rf / b

Measure of systematic risk -> as indicated by Beta

Treynor ratio is the slope of SML > 0

M^2

Rf + Std Dev.m [Erp -Rf / Std dev.p]

Is the sharpe ratio adjusted to to measure the value add/lost of taking the same risk as the “market” -> creates a like-for-like comaprision across differenent managers. Total risk measure

Is the slope of the CAL if > CML (not sure if this is right?)

Sharpe:

ERp - Rf / Std dev.p

Incremental value add, total risk measure

plots above market CML if > 0

Sharpe is the slope of the CAL

M2 measures a hypothetical portfolio if they lend at Rf to increase risk and return if the portfolio has less risk than the market, so it should end up being at a point better than CML if that is the case, and is equating it to the total risk in the market to see what the perf would have been. If it’s better then M2 is superior (and Sharpe is as well).

What do we call the slope of M^2?

The Sharpe is the slope of the CAL. The M^2 is the point above the CAL directly above the market portfolio as the M^2 is merely the return if the portfolio would have had the std dev of the market.