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Kelly criterion revisited: optimal bets

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Author Info

  • E. W. Piotrowski

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  • M. Schroeder

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    Abstract

    Kelly criterion, that maximizes the expectation value of the logarithm of wealth for bookmaker bets, gives an advantage over different class of strategies. We use projective symmetries for a explanation of this fact. Kelly's approach allows for an interesting financial interpretation of the Boltzmann/Shannon entropy. A “no-go” hypothesis for big investors is suggested. Copyright EDP Sciences/Società Italiana di Fisica/Springer-Verlag 2007

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    File URL: http://hdl.handle.net/10.1140/epjb/e2007-00126-3
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    Bibliographic Info

    Article provided by Springer in its journal The European Physical Journal B.

    Volume (Year): 57 (2007)
    Issue (Month): 2 (05)
    Pages: 201-203

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    Handle: RePEc:spr:eurphb:v:57:y:2007:i:2:p:201-203

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    Web page: http://www.springer.com/economics/journal/10051

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    Related research

    Keywords: 89.65.Gh Economics; econophysics; financial markets; business and management; 89.70.+c Information theory and communication theory;

    References

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    1. S. Illeris & G. Akehurst, 2001. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 21(1), pages 1-4, January.
    2. Edward W. Piotrowski & Jan Sladkowski, . "Geometry of Financial Markets - Towards Information Theory Model of Markets," Departmental Working Papers 26, University of Bialtystok, Department of Theoretical Physics.
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    Cited by:
    1. Edward W. Piotrowski & Jan Sladkowski & Anna Szczypinska, 2007. "Reinforcement learning in market games," Papers 0710.0114, arXiv.org.
    2. Luo, Yong & Zhu, Bo & Tang, Yong, 2014. "Simulated annealing algorithm for optimal capital growth," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 408(C), pages 10-18.
    3. Edward W. Piotrowski & Jerzy Luczka, . "The relativistic velocity addition law optimizes a forecast gambler's profit," Departmental Working Papers 31, University of Bialtystok, Department of Theoretical Physics.

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