Objective and subjective entropy measures of portfolio suboptimality

Ati S Sharma

Papers from arXiv.org

Abstract: The cost of holding a suboptimal portfolio instead of the Kelly-optimal one admits two exact relative-entropy representations. Under the true measure, the expected log-wealth shortfall equals the KL divergence from the true measure to the measure under which the suboptimal portfolio would be optimal. Under that measure, the suboptimal portfolio appears to outperform the Kelly portfolio, and the apparent outperformance equals the reverse KL divergence.

Date: 2026-07
References: Add references at CitEc
Citations:

Downloads: (external link)
https://arxiv.org/pdf/2607.09505 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2607.09505

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().