Excess Return over MTCR’s formula is equivalent to a Sharpe Ratio. The calculation is: (R_{p} -R_{f}) / MCTR The Sharpe ratio adjusts for risk, and can help you determine the investment choice that will deliver the highest returns while considering risk.

However, I still cannot understand why an optimal asset allocation involves the fact that ALL assets have MCTR and hence equal Sharpe ratios? Why is not an optimal asset allocation involving assets with highest Sharpe ratios? (but not necessarily equal?)

Thanks!!