Page 32 - FINAL CFA SLIDES DECEMBER 2018 DAY 12
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Session Unit 12:
42. Portfolio Risk and Return: Part II
The CML uses total risk = σ on the x-axis. Hence, ONLY efficient portfolios will plot on the CML.
p
On the other hand, the SML uses beta (systematic risk) on the x-axis. So in a CAPM world, all
properly priced securities and portfolios of securities will plot on the SML, as shown below:
Check the risk return
positions per CML to
tanties determine
correct pricing per SML
