On the Extensive Number of Plays to Achieve Superior Performance with the Geometric Mean Strategy
AbstractThe advantages of the Geometric Mean or Log Strategy have been well documented and recommended by many because a follower of this strategy will ultimately outperform in the long-run any other significantly different strategy, almost surely. This paper provides both theory and evidence to indicate that the "long-run" can be quite long in risky situations. These cases are typified by many business ventures and undiversified speculative investments in OTC securities. On the other hand, it is shown that the Log Strategy can "virtually dominate" in a moderate number of plays in cases when risk is low.
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Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 39 (1993)
Issue (Month): 9 (September)
geometric mean return; log utility; log strategy;
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- MacLean, Leonard C. & Sanegre, Rafael & Zhao, Yonggan & Ziemba, William T., 2004. "Capital growth with security," Journal of Economic Dynamics and Control, Elsevier, vol. 28(5), pages 937-954, February.
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