Introduction to the Classic Papers and Theories

Leonard C MacLean, Edward O Thorp and William T Ziemba

Chapter 11 in The Kelly Capital Growth Investment Criterion:Theory and Practice, 2011, pp 143-146 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In this part of the book, we present papers that formalize, generalize, and extend the early results on the Kelly strategy. Although the early papers on the Kelly optimal growth strategy contained powerful results, the topic was not significant in mainstream financial economics. Unfortunately, despite lots of good evidence, it is still not a serious part of academic financial economics. Roll (1973), for example, shows that in his data set, capital growth and mean-variance portfolios are similar. Thorp (1971) had shown that the Kelly strategies were not necessarily mean-variance efficient and Markowitz (1976) argued that the Kelly strategy was the limiting mean-variance portfolio. These papers appear later in this book. Here we take up the work of those who extended the early results and begin to consider the good and bad properties of these strategies and the sensitivity of the results to data inputs and errors…

Keywords: Kelly Criterion; Dynamic Investment Analysis; Capital Growth Theory; Sports Betting; Hedge Fund Strategies; Speculative Investing; Fortune 's Formula (search for similar items in EconPapers)
Date: 2011
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