4 ms·

Seriously. Full Kelly betting involves the use of significant leverage. The correct Kelly bet on the S&P index would be long 2.5x your total wealth.

• kqr 6y ago
  This result depends on assumptions about the future that would not sit easy with me.
  • xiphias2 6y ago
    I can't tell you if democrats or republicans will win, but I'm quite confident that QE won't stop.
    • kqr 6y ago
      And this is what makes SPY mispriced? Why do you think other investors don't share your view?
• sigstoat 6y ago
  it literally can't tell you to bet more than your bankroll. if you include margin in your bankroll, well, that's on your head.
  • smabie 6y ago
    Yes it can. Kelly can be applied to determine optimal leverage ratios. Assuming a risk free rate of zero, that formula is expected return divided by expected variance. so 10% expected return and 10% expected volatility, optimal Kelly is 10x leverage.
• xiphias2 6y ago
  You are right, but with execution risk / slippage it gets closer to 2x (2x and 3x are both close to 2.5x, but 2x has been performing better in the past).