Capital allocation line is a line created on all possible combinations of Figure risk-free assets and risk assets, this figure shows the returns to investors by taking on investment risk may be obtained. Capital allocation line help investors choose how much of each to invest in a risk-free asset and one or more risk assets. <br>Individual differences in risk aversion, even in the face the same opportunities, will choose a different allocation of capital. This curve can be no difference in the reflected CAL. In general, the higher the risk aversion of investors, its indifference curve steeper. Steep curve means that investors require higher returns to compensate for the expected increase in portfolio risk.
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