Kelly Capital Growth Investment Criterion, The: Theory And Practice

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Leonard C Maclean (Dalhousie Univ, Canada) Edward O Thorp (Univ Of California, Irvine, Usa)

Kelly Capital Growth Investment Criterion, The

Theory And Practice

Leonard C Maclean (Dalhousie Univ, Canada), Edward O Thorp (Univ Of California, Irvine, Usa), William T Ziemba (Univ Of British Columbia, Canada; London Sch Of Economics, Uk & Korea Inst Of Science And Technology, Korea)

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English

World Scientific Publishing Co Pte Ltd
11 February 2011

Investment & securities

Series: World Scientific Handbook in Financial Economics Series

This volume provides the definitive treatment of fortune's formula or the Kelly capital growth criterion as it is often called. The strategy is to maximize long run wealth of the investor by maximizing the period by period expected utility of wealth with a logarithmic utility function. Mathematical theorems show that only the log utility function maximizes asymptotic long run wealth and minimizes the expected time to arbitrary large goals. In general, the strategy is risky in the short term but as the number of bets increase, the Kelly bettor's wealth tends to be much larger than those with essentially different strategies. So most of the time, the Kelly bettor will have much more wealth than these other bettors but the Kelly strategy can lead to considerable losses a small percent of the time. There are ways to reduce this risk at the cost of lower expected final wealth using fractional Kelly strategies that blend the Kelly suggested wager with cash. The various classic reprinted papers and the new ones written specifically for this volume cover various aspects of the theory and practice of dynamic investing. Good and bad properties are discussed, as are fixed-mix and volatility induced growth strategies. The relationships with utility theory and the use of these ideas by great investors are featured.

Edited by: Leonard C Maclean (Dalhousie Univ Canada), Edward O Thorp (Univ Of California, Irvine, Usa), William T Ziemba (Univ Of British Columbia, Canada; London Sch Of Economics, Uk & Korea Inst Of Science And Technology, Korea)
Imprint: World Scientific Publishing Co Pte Ltd
Country of Publication: Singapore
Volume: 3
Dimensions: Height: 249mm, Width: 170mm, Spine: 51mm
Weight: 1.633kg
ISBN: 9789814293495
ISBN 10: 9814293490
Series: World Scientific Handbook in Financial Economics Series
Pages: 884
Publication Date: 11 February 2011
Audience: Professional and scholarly , Undergraduate
Format: Hardback
Publisher's Status: Unspecified

Reviews for Kelly Capital Growth Investment Criterion, The: Theory And Practice

For those who have heard of the Kelly mythos and want to explore the science behind it, this book will be an instant classic. The editors have collected all the pivotal original papers, spanning centuries and the rarely bridged gulf between theory and practice. This book is indispensable for anyone interested in Kelly's legacy. -- William Poundstone ""Author of ""Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street"""" The present handbook assembles in an impressive way the classical papers and also provides the link to modern research. It also presents important papers with a critical view towards the Kelly criterion. Among them figures the famous three-page paper of P. Samuelson from 1979 which is written by using exclusively one-syllable words. -- Professor Walter Schachermayer ""Faculty of Mathematics, University of Vienna""