Appreciate it. I probably shouldn't have said blown the fuck out yesterday (I was worried it wouldn't be provocative enough. Lol)
But in retrospect, I wasn't misunderstanding Kelly here, right? Kelly applies equally if you divide a portfolio into pots.
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I’m not gonna lie it’s a technicality but I’ll take it
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One other point: any of my subportfolios that are not log-wealth-optimized will not have any impact on my asymptotic wealth growth rate at all. So if there's some portion of it that I'm able to log-wealth optimize, that's the only part of my portfolio that matters.
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(This point, unlike the other one, leans on the infinite-time-horizon assumption)
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It relies on a number of things, and e.g. means that any not-infinitely-repeatable process is irrelevant
(which is one reason I think the backdrop scenario kelly is usually presented in is not a helpful one to try to think about)
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er also they *do* have an impact on your asymptotic wealth growth rate!
just not your asymptotic *log* wealth growth rate
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er something like EV($_{t+!})/EV($_t)
That’s rate of growth of expected value of wealth. Maximizing EV at each step maximizes that.
But Kelly doesn’t just maximize rate of growth of log wealth. It maximizes expected rate of growth of WEALTH, full stop.
I think this might be the heart of our conceptual disagreement.
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To be more precise, time-average rate of growth:
EV[($_t / $_0)^(1/t)]
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