Diversification and limited information in the Kelly game
- Medo, Matúš Physics Department, University of Fribourg, Switzerland
- Pis’mak, Yury M. Department of Theoretical Physics, State University of Saint-Petersburg, Russia
- Zhang, Yi-Cheng Physics Department, University of Fribourg, Switzerland - Lab of Information Economy and Internet Research, University of Electronic Science and Technology, Chengdu, China
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11.07.2008
Published in:
- Physica A: Statistical Mechanics and its Applications. - 2008, vol. 387, no. 24, p. 6151-6158
English
Financial markets, with their vast range of different investment opportunities, can be seen as a system of many different simultaneous games with diverse and often unknown levels of risk and reward. We introduce generalizations to the classic Kelly investment game [J.L. Kelly, IEEE Transactions on Information Theory 2 (1956) 185–189] that incorporates these features, and use them to investigate the influence of diversification and limited information on Kelly-optimal portfolios. In particular, we present approximate formulas for optimizing diversified portfolios and exact results for optimal investment in unknown games where the only available information is past outcomes.
- Faculty
- Faculté des sciences et de médecine
- Department
- Département de Physique
- Language
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- English
- Classification
- Physics
- License
- License undefined
- Identifiers
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- RERO DOC 10585
- DOI 10.1016/j.physa.2008.07.007
- Persistent URL
- https://folia.unifr.ch/unifr/documents/300801
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