Related papers: Tackling estimation risk in Kelly investing using …
While the Kelly portfolio has many desirable properties, including optimal long-term growth rate, the resulting investment strategy is rather aggressive. In this paper, we suggest a unified approach to the risk assessment of the Kelly…
Kelly's Criterion is well known among gamblers and investors as a method for maximizing the returns one would expect to observe over long periods of betting or investing. These ideas are conspicuously absent from portfolio optimization…
Kelly criterion, that maximizes the expectation value of the logarithm of wealth for bookmaker bets, gives an advantage over different class of strategies. We use projective symmetries for a explanation of this fact. Kelly's approach allows…
The focal point of this paper is the so-called Kelly Criterion, a prescription for optimal resource allocation among a set of gambles which are repeated over time. The criterion calls for maximization of the expected value of the…
For a sequence of binary bets, the Kelly criterion provides a closed-form solution that maximizes the expected growth rate of wealth. In contrast, when multiple bets are placed simultaneously (e.g., in portfolio allocation or prediction…
Kelly's criterion is a betting strategy that maximizes the long term growth rate, but which is known to be risky. Here, we find optimal betting strategies that gives the highest capital growth rate while keeping a certain low value of risky…
The original Kelly criterion provides a strategy to maximize the long-term growth of winnings in a sequence of simple Bernoulli bets with an edge, that is, when the expected return on each bet is positive. The objective of this work is to…
In modern portfolio theory, the balancing of expected returns on investments against uncertainties in those returns is aided by the use of utility functions. The Kelly criterion offers another approach, rooted in information theory, that…
Following a series of works on capital growth investment, we analyse log-optimal portfolios where the return evaluation includes `weights' of different outcomes. The results are twofold: (A) under certain conditions, the logarithmic growth…
We investigate the most popular approaches to the problem of sports betting investment based on modern portfolio theory and the Kelly criterion. We define the problem setting, the formal investment strategies, and review their common…
From the Hamilton-Jacobi-Bellman equation for the value function we derive a non-linear partial differential equation for the optimal portfolio strategy (the dynamic control). The equation is general in the sense that it does not depend on…
Prompted by a recent experiment by Victor Haghani and Richard Dewey, this note generalises the Kelly strategy (optimal for simple investment games with log utility) to a large class of practical utility functions and including the effect of…
In this paper, we consider a simple discrete-time optimal betting problem using the celebrated Kelly criterion, which calls for maximization of the expected logarithmic growth of wealth. While the classical Kelly betting problem can be…
In the online portfolio optimization framework, existing learning algorithms generate strategies that yield significantly poorer cumulative wealth compared to the best constant rebalancing portfolio in hindsight, despite being consistent in…
We review some fundamental concepts of investment from a mathematical perspective, concentrating specifically on fractional-Kelly portfolios, which allocate a fraction of wealth to a growth-optimal portfolio while the remainder collects (or…
In portfolio analysis, the traditional approach of replacing population moments with sample counterparts may lead to suboptimal portfolio choices. I show that optimal portfolio weights can be estimated using a machine learning (ML)…
We develop a general framework for applying the Kelly criterion to stock markets. By supplying an arbitrary probability distribution modeling the future price movement of a set of stocks, the Kelly fraction for investing each stock can be…
Risk and uncertainty will always be a matter of experience, luck, skills, and modelling. Leverage is another concept, which is critical for the investor decisions and results. Adaptive skills and quantitative probabilistic methods need to…
We examine the problem of optimal portfolio allocation within the framework of utility theory. We apply exponential utility to derive the optimal diversification strategy and logarithmic utility to determine the optimal leverage. We enhance…
The paper provides a mathematical model and a tool for the focused investing strategy as advocated by Buffett, Munger, and others from this investment community. The approach presented here assumes that the investor's role is to think about…