Diversification and limited information in the Kelly game
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Medo, Matúš
Physics Department, University of Fribourg, Switzerland
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Pis’mak, Yury M.
Department of Theoretical Physics, State University of Saint-Petersburg, Russia
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Zhang, Yi-Cheng
Physics Department, University of Fribourg, Switzerland - Lab of Information Economy and Internet Research, University of Electronic Science and Technology, Chengdu, China
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.
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Faculty
- Faculté des sciences et de médecine
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Department
- Département de Physique
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Language
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Classification
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Physics
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License
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License undefined
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Identifiers
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Persistent URL
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https://folia.unifr.ch/unifr/documents/300801
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