Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
977819 | Physica A: Statistical Mechanics and its Applications | 2008 | 8 Pages |
Abstract
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.
Related Topics
Physical Sciences and Engineering
Mathematics
Mathematical Physics
Authors
MatúÅ¡ Medo, Yury M. Pis'mak, Yi-Cheng Zhang,