The Kelly Capital Growth Investment Criterion: Theory and Practice: 3 - Rilegato

Rilegato

ISBN 10: 9814293490 ISBN 13: 9789814293495

Casa editrice: World Scientific Pub Co Inc, 2011

Riassunto

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.

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Recensione:

In 1738 Daniel Bernoulli wrote a path-breaking paper. He gave a solution to the St. Petersburg Paradox by suggesting the use of a utility function. Arguing that marginal utility should be indirectly proportional to a person's wealth, he arrives at the logarithm. It can safely be stated that the idea of utility functions and marginal utility is the most precious gift which mathematics ever made to economics. This idea shaped the form of economic thinking in a decisive way overthe past centuries. A central role is played, from the very early days on, by the logrithmic utility. In a dynamic setting this criterion, now named after the seminal work of J Kelly in 1956, leads in average to the optimal growth rate of a portfolio. 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

This is a fantastic reference covering the theory and practice of the field beautifully organized and produced. I have already used it and I will refer it to my students and colleagues. --Professor David G Luenberger, Stanford University

This volume provides a fascinating historical account and critical assessment of the Kelly criterion (expected logarithmic utility maximization) as a universal criterion for the tradeoff between risk and return in portfolio management and gambling. Whereas economists have, by now, lost their innocence, recognizing that investors may have heterogeneous risk-return tradeoffs which may or may not be codifiable with von Neumann-Morgenstern preferences and even with rational decision-making, the quest for the Holy Grail of a universal criterion vividly documents early attempts to lay the scientific micro-foundations of economics. --George M Constantinides, Leo Melamed Professor of Finance, The University of Chicago, USA

This is a fantastic reference covering the theory and practice of the field beautifully organized and produced. I have already used it and I will refer it to my students and colleagues. --Professor David G Luenberger, Stanford University

The tragically short-lived genius John Kelly Jr. is best remembered for one of the most original and far-reaching ideas in modern finance. The Kelly criterion can be described as a gambling system that really works, in that it achieves the maximum long-term return from a favorable speculation. Kelly's idea has long had a cult following among people ranging from hedge fund managers to blackjack players. 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

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Su questa edizione

• Editore: World Scientific Pub Co Inc
• Data di pubblicazione: 2011
• ISBN 10: 9814293490
• ISBN 13: 9789814293495
• Rilegatura: Copertina rigida
• Numero di pagine: 853
• Redattore: Maclean Leonard C., Thorp Edward O., Ziemba William T.