TITLE:
Multivariate Volatility Regulated Kelly Strategy: A Superior Choice in Low Correlated Portfolios
AUTHORS:
Ruanmin Cao, Zhenya Liu, Shixuan Wang, Weifeng Zhou
KEYWORDS:
Kelly, Low Correlation, Portfolio
JOURNAL NAME:
Theoretical Economics Letters,
Vol.7 No.5,
August
15,
2017
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.