Fractional Kelly strategies with low-risk stocks

Wai Mun Fong

Journal of Investment Strategies

Abstract: ABSTRACT Stocks with high Sharpe ratios and low volatility are powerful drivers of long-term wealth. Low-beta stocks have precisely this feature. Using the framework of fractional;Kelly strategies, we show that optimal portfolios with low-beta stocks generate higher median wealth and lower intra-horizon shortfall risk compared with traditional asset;allocations using cap-weighted stock market indexes. Cap-weighted market portfolios resemble low-return, high-beta stocks and inherit their inefficiencies as wealth drivers.

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Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ6:2467311

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