Confidence Intervals for the Kelly Criterion
12 Pages Posted: 23 Jun 2014
Date Written: June 21, 2014
Investing according to the Kelly criterion will theoretically outperform any other sizing strategy. However, the value of the optimal fraction will generally need to be estimated from empirical data. This means that our estimate will invariably have a degree of uncertainty attached to it. In this note I show how to calculate the variance of the estimated Kelly criterion ratio.
Keywords: Kelly criterion, optimal risk, uncertainty
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