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This massively oversells the usefulness of the Kelly Criterion. The opening lines are > One should buy stock when it is undervalued. What I have always wondere

• D_Alex 8y ago
  Heh... The most value I got out of applying the Kelly Criterion was having the Exploration Manager for an oil and gas company admitting that he does not believe the estimates that came out of his own department (applying the Kelly Criterion to the numbers he provided would have led to the company carrying the exploration project internally, rather than looking for joint venture partners to share the risks).
• phkahler 8y ago
  >> But the rest of the post analyses a mathematical game which has nothing to do with buying stocks, and is in fact only useful in theoretical situations where you know the precise distribution of outcomes. You might want to think about that. In the real world you don't know anything with precision which means you probably can't do better. One of the unrealistic aspects of it was the idea that you can play as many times as you like, but that's not possible in the real world. But we can move toward playing many times through diversification. That's a good lesson in itself.
  • np_tedious 8y ago
    I don't think diversification is much like playing multiple games at all. One expands on the axis of time, with the game constant. The other expands on the number of unique games all played simultaneously