A novel derivation and interpretation of the Kelly criterion

Andreas Kull

Journal of Investment Strategies

Abstract: This paper discusses multiperiod investment processes under parameter uncertainty and the criterions with which to maximize exponential growth. By applying an information-theoretical argument to a Bernoulli process, we find the least biased investment strategy that is consistent with an expected exponential growth rate. This strategy is found to be directly linked to the Kelly strategy, thus giving a novel derivation and interpretation of the Kelly criterion.

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Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ6:7953246

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