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capital market line

   Also found in: Acronyms, Wikipedia 0.04 sec.
Capital market line (CML)
The line defined by every combination of the risk-free asset and the market portfolio. The line represents the risk premium you earn for taking on extra risk. Defined by the capital asset pricing model.
capital market line
The line used in the capital-asset pricing model to present the rates of return for efficient portfolios. These rates will vary depending upon the risk-free rate of return and the level of risk (as measured by beta) for a particular portfolio. The capital market line shows a positive linear relationship between returns and portfolio betas. Also called market line. See also alpha, beta, systematic risk.


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One common example of using this risk/reward measurement is found in the so-called "modified capital market line.
All Together Now by Miccolis, Jerry / Best's Review
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