CAPM & the SML
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The Capital Asset Pricing Model (CAPM) assumes only one efficient portfolio, the market portfolio.
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CAPM and the CML are more strict than simple Mean-Variance and the CAL.
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CAPM and CAL similarities:
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Risk averse investors.
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Shared investor assumptions for expected returns, variances and standard deviations, and covariances of returns.
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The above variables are the only inputs required to calculate the efficient frontier.
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No taxes and no transaction costs.
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