- June 1, 2015: Vol. 2, Number 6

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Learning from the Greeks: The ‘march of folly’ is written deeply into human DNA

by Hugh Kelly

Commercial property investors, like investors in stock and bond portfolios, love to borrow from the Greeks. This is not meant in the sense that the Greeks themselves loved to borrow from German banks a decade ago, only to wind up Europe’s test case for working out national fiscal policy when a common currency places monetary policy outside a country’s domain. I mean instead the easy adoption of the Greek alphabet to describe investment approaches.

Institutional portfolios generally follow the rule of “beta,” as described in the Capital Asset Pricing Model. CAPM, as it is known for short, suggests that investors are best off if they don’t try to outthink the market which, on the whole, has information in greater volume and quality than any one investor can accumulate. So there’s an array of assets, priced by the market and allocated by share by the market, that is in a deep way “optimal” in the sense that it gives the best risk-adjusted returns per unit of risk

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