Queries on CAL holding, offering

AnalystAlan

We know that as we move up along the CAL, the weightage of Risky asset keeps going up and that of Risk Free asset coming down. At the Tangent, is it that the weightage of Risky asset is 100%? If so, then will not everybody chose Tangency as the most preferred portfolio, with that offering the best Reward to Risk ratio?


We know that for Regression, the slope is covar(X,Y)/var(X). How is that holding true for the slope calculated for CAL, which is (Expected Return on Risky asset - RFR)/SD of Risky asset.

Analyze_This

Thanks Areyouserious, its much clearer now. Since your concept is clear, let me ask you this too, can you explain as to how they get to the formula of variance in Market Model (the one with Beta). Many thanks in advance.