Fractional Kelly Strategies for Benchmarked Asset Management

Mark Davis and Sebastien Lleo

Chapter 27 in The Kelly Capital Growth Investment Criterion:Theory and Practice, 2011, pp 385-407 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In this paper, we extend the definition of fractional Kelly strategies to the case where the investor's objective is to outperform an investment benchmark. These benchmarked fractional Kelly strategies are efficient portfolios even when asset returns are not lognormally distributed. We deduce the benchmarked fractional Kelly strategies for various types of benchmarks and explore the interconnection between an investor's risk-aversion and the appropriateness of their investment benchmarks.

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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