Author(s)

Ruanmin Cao¹, Zhenya Liu^2,3*, Shixuan Wang⁴, Weifeng Zhou²

¹CITIC Securities Co., Ltd, Beijing, China.
²Economics department, University of Birmingham, Birmingham, UK.
³Finance Department, Renmin University of China, Beijing, China.
⁴Cardiff University, Cardiff, UK.

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.

Kelly, Low Correlation, Portfolio

Cao, R. , Liu, Z. , Wang, S. and Zhou, W. (2017) Multivariate Volatility Regulated Kelly Strategy: A Superior Choice in Low Correlated Portfolios. Theoretical Economics Letters, 7, 1453-1472. doi: 10.4236/tel.2017.75098.