Slope of CAL ?

What is the slope of the Capital Allocation Line ? Do not refer to your notes


i.e. the Sharpe Ratio

yes, both correct

…then, please clarify, the slope of the CAL is the same as the slope of the SML except that in case of CAL, Rf is deducted from the Target return (Rt) as opposed to CML when Rf is deducted from Rm.

slope of CAL = Sharpe Ratio for the tangent Portfolio. SML is a special case of CAL - where all investors have the common homogenous expectations - so all reach the common market Tangent portfolio of risky assets.

cpk - no your second statement is incorrect. The CML is a special case of CAL. The SML is the CAPM.

Also, SML’s risk measure is Beta while CML and CAL’s risk measure is Std. dev.

thanks Janakasri and thommo… as can be seen - it has been some time!!!