Capital growth with security

Leonard C. MacLean, Rafael Sanegre, Yonggan Zhao and William T. Ziemba

Chapter 25 in The Kelly Capital Growth Investment Criterion:Theory and Practice, 2011, pp 355-372 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This paper discusses the allocation of capital over time with several risky assets. The capital growth log utility approach is used with conditions requiring that specific goals are achieved with high probability. The stochastic optimization model uses a disjunctive form for the probabilistic constraints, which identifies an outer problem of choosing an optimal set of scenarios, and an inner (conditional) problem of finding the optimal investment decisions for a given scenarios set. The multiperiod inner problem is composed of a sequence of conditional one period problems. The theory is illustrated for the dynamic allocation of wealth in stocks, bonds and cash equivalents.

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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