Fortune's Formula
William Poundstone · 2006
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About the book
This book is about Kelly's criterion developed in 1956 by two scientists (John Kelly Jr. and Claude Shannon) at Bell Labs for the transmission of information over copper wires but who immediately realized its application to gaming and investing. Many more professional gamblers used the formula than investors. One investor Edward Thorpe used it both to beat the casino's and as a hedge fund manager to beat the market. THE FORMULA does not tell one how to find edge but once one does the formula indicates how much one should bet to maximize the creation of wealth. Be warned that the use of a full Kelly will result in much volatility in the size of one's trading account. Many use a 1/2 Kelly which decrease volatility by 90% but decreases the size of the account after a 1000 trades by only 25%.
Book details
- Year
- 2006
- Language
- English
- Publisher
- Hill and Wang
- Editions
- 4
- Reader rating
- 4.3 / 5 (6)
- Pages
- 400
- ISBN
- 9780809045990
Data source: Wikidata
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