IDEAS home Printed from https://ideas.repec.org/a/bpj/germec/v13y2012i2p228-240.html
   My bibliography  Save this article

Growth Optimal Investment Strategy: The Impact of Reallocation Frequency and Heavy Tails

Author

Listed:
  • Bamberg G.

    (Universität Augsburg, Institut für Statistik and Mathematische Wirtschaftstheorie,Augsburg, Germany)

  • Neuhierl A.

    (Northwestern University – Kellogg School of Management, James L.Allen Center, Campus Dr,Evanston, United States of America)

Abstract

The strategy to maximize the long-term growth rate of final wealth (maximum expected log strategy, maximum geometric mean strategy, Kelly criterion) is based on probability theoretic underpinnings and has asymptotic optimality properties. This article reviews the allocation of wealth in a two-asset economy with one risky asset and a risk-free asset. It is also shown that the optimal fraction to be invested in the risky asset (i) depends on the length of the basic return period and (ii) is lower for heavy-tailed log returns than for light-tailed log returns.

Suggested Citation

  • Bamberg G. & Neuhierl A., 2012. "Growth Optimal Investment Strategy: The Impact of Reallocation Frequency and Heavy Tails," German Economic Review, De Gruyter, vol. 13(2), pages 228-240, May.
    • Handle: RePEc:bpj:germec:v:13:y:2012:i:2:p:228-240
    DOI: 10.1111/j.1468-0475.2011.00553.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1468-0475.2011.00553.x
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1111/j.1468-0475.2011.00553.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Svetlozar Rachev & Stoyan Stoyanov & Stefan Mittnik & Frank J. Fabozzi & Abootaleb Shirvani, 2017. "Behavioral Finance -- Asset Prices Predictability, Equity Premium Puzzle, Volatility Puzzle: The Rational Finance Approach," Papers 1710.03211, arXiv.org, revised Feb 2020.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:germec:v:13:y:2012:i:2:p:228-240. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.