Capital market line

Capital market species CML is a tangent brand drawn from the ingredient of the risk-free asset to the feasible region for risky assets. The tangency section M represents the market portfolio, so named since all rational investors minimum variance criterion should name their risky assets in the same proportions as their weights in the market portfolio.

Capital market line, Sharpe ratio and alpha

All of the portfolios on the CML gain the same Sharpe ratio as that of the market portfolio, i.e.

In fact, the slope of the CML is the Sharpe ratio of the market portfolio.

A fine market hypothesis.

This abnormal extra expediency over the market's value at a assumption level of risk is what is called the alpha.