Kelly Capital Growth Investment CriterionLeonard C. MacLean, Edward O. Thorp, William T. Ziemba
Kelly Capital Growth Investment Criterion
by Leonard C. MacLean, Edward O. Thorp, William T. Ziemba · first published 2010
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2019–2025first – last mentioned
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…what people would ordinarily think of as "wealth". It applies just as well to anything you can measure with some sort of utility where compounding makes sense. The best overview I've found so far is The Kelly Capital Growth Investment Criterion[1], which unfortunately is a thick collection of peer-reviewed science, so it's very detailed and heavy on the maths, too. [1]: https://www.amazon.com/KELLY-CAPITAL-GROWTH-INVESTMENT-CRITE...
on “Heuristics that almost always work” ↗If interested, two books on this are great: “fortunes formula” for a more riveting story of thorp and Shannon “Kelly capital growth investment criterion” by Thorp, Maclean, William — for the more technical take I found this essay in this second book, and liked it so much I found the standalone pdf. It’s inspiring how approachable and human some of the…
on “Exposition of a New Theory on the Measurement of Risk (1738) [pdf]” ↗…joint probability distribution of the outcome for each alternative, evaluate E(log X) using it, and pick the alternative for which it is highest. For a deeper introduction, I recommend the somewhat heavy Kelly Capital Growth Investment Criterion[3] which is a well-curated collection of papers on the Kelly criterion and its various uses. [1]: https://xkqr.org/insurance/?wealth=0&offered=0 [2]: https://entropicthoughts.com/the-misunderstood-kelly-criteri...…
on “Escaping the odds and a formula for life (2024)” ↗And when you're done with that, the Kelly Capital Growth Investment Criterion is one of the better books I've read. But it's a much more advanced read.
on “Kelly Criterion” ↗And if you want to dig deeper, I'd follow up with The Kelly Capital Growth Investment Criterion. It's just a collection of peer-reviewed science on the Kelly criterion and various applications. Very dense reading, but also the best overview of the subject I've seen. https://www.amazon.com/Kelly-Capital-Growth-Investment-Crite...
on “The Kelly criterion: How to size bets (2019)” ↗…Information Theory" shows some interesting connections between Kelly betting and optimal message encoding. - Ed Thorp, the inventor of card counting, has a nice compendium of papers on this in "The Kelly Capital Growth Investment Criterion".
on “Kelly Criterion” ↗…appropriate rate of rebalancing, accounting for transaction costs. [1]: I don't have citations at hand, but the papers are reproduced (among many other interesting ones!) in Theory and Practise of the Kelly Capital Growth Investment Criterion.
on “Stock Market Charts You Never Saw” ↗