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Multivariate Volatility Regulated Kelly Strategy: A Superior Choice in Low Correlated Portfolios
CITIC Securities Co., Ltd, Beijing, China
Finance Department, Renmin University of China, Beijing, China
Cardiff University, Cardiff, UK
Economics department, University of Birmingham, Birmingham, UK
- 1 CITIC Securities Co., Ltd, Beijing, China
- 2 Finance Department, Renmin University of China, Beijing, China
- 3 Cardiff University, Cardiff, UK
- 4 Economics department, University of Birmingham, Birmingham, UK
Theoretical Economics Letters·Volume 07 (2017)·Pages 1453–1472·Published 30 June 2017·DOI10.4236/tel.2017.75098
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Abstract
We propose a Multivariate Volatility Regulated Kelly strategy, which has extra penalization on variance compared to the Kelly criterion. The objective function is constructed and solved. We show the superiority of our method in relatively low correlated portfolios, relative to the fractional Kelly and full Kelly strategies. Our strategy reduces the short-term risk without sacrificing the growth rate to invest more in risk-free assets. Simulation results and Chinese commodity future empirical results strongly support our method.
KeywordsKellyLow CorrelationPortfolio
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