7 ms·
"most people are not that aggressive in their investment decisions" That's because Kelly's criterion is a special case of Ole Peters, where Kelly's is a very a
by ReflectedImage 6y ago
"most people are not that aggressive in their investment decisions"
That's because Kelly's criterion is a special case of Ole Peters, where Kelly's is a very aggressive option. There are other criterion that can be used, which are not so aggressive. Ole Peters lists the class of functions that can be used in his paper.
So basically economics has rejected it for the wrong reason.
- QuesnayJr 6y agoAs far as I can tell, he lists wealth, and log wealth as the two possible criteria. If there are others, I missed them. If you try to match a power utility model with stock market data, to match prices on the stock market, you would reject both the additive model (eta = 0) and the multiplicative model (eta = 1), in favor of an eta greater than 10. This is known as the equity premium puzzle. The thrust of research over the past 30 years in explaining stock prices has been to reject both Peters' models, and expected utility in general. People build their entire careers on investigating alternatives. There are hundreds of experiments to explain, plus all of the real-world data. It turns out that explaining all of this with one unified model is hard.
- ReflectedImage 6y agoThose are the EUT criteria not Ole Peters. The maths you are looking for is here: https://ergodicityeconomics.files.wordpress.com/2018/06/ergodicity_economics.pdf https://ergodicityeconomics.files.wordpress.com/2018/06/ergo...