Capital Growth Theory

Igor V. Evstigneev, Thorsten Hens and Klaus Schenk-Hoppé
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Igor V. Evstigneev: University of Manchester
Thorsten Hens: University of Zurich

Chapter 17 in Mathematical Financial Economics, 2015, pp 169-176 from Springer

Abstract: Abstract The chapter presents basic ideas and results related to capital growth theory. It introduces the dynamic securities market model with an infinite time horizon and self-financing strategies defined in terms of investment proportions. The highlight of the chapter is the study of the problem of growth optimal investments. It shows that the log-optimal portfolio rule is the solution to this problem in the class of simple (constant proportions) strategies. The chapter concludes with the classical example of the horse race model and the Kelly gambling rule of “betting your beliefs.”

Keywords: Trading Strategy; Asset Return; Initial Wealth; Unit Simplex; Infinite Time Horizon (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-319-16571-4_17

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DOI: 10.1007/978-3-319-16571-4_17

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