WHATS THE DIFFERENCE BETWEEN 'CAPITAL MARKET LINE(CML)' & 'SECURITY MARKET LINE(SML)'
Vishnu Nair (Chartered Accountant) (935 Points)
23 November 2009WHATS THE DIFFERENCE BETWEEN 'CAPITAL MARKET LINE(CML)' & 'SECURITY MARKET LINE(SML)'
MOHIT MAHAJAN
(LCS, ACA)
(2050 Points)
Replied 23 November 2009
1. In CML expected return of portfolio is taken on Y-axis whereas in case of SML expected retun of securities is taken on Y-axis.
2. In CML standard deviation of portfolio is taken on x-axis whereas in SML Beta of secuity is taken on x-axis.
3. Only market pofolio and risk free asset lies on the CML whereas every security lies on the SML.
4. Slope of CML = rm - rf / std. deviation of m
Slope of SML= rm - rf / Beta of m
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