Physics – Condensed Matter – Disordered Systems and Neural Networks
Scientific paper
1998-10-08
Physics
Condensed Matter
Disordered Systems and Neural Networks
13 pages, LaTeX, uses epsfig.sty, 5 ps figures, submitted to Int. J. of Theoretical and Applied Finance
Scientific paper
A portfolio of different stocks and a risk-less security whose composition is dynamically maintained stable by trading shares at any time step leads to a growth of the capital with a nonrandom rate. This is the key for the theory of optimal-growth investment formulated by Kelly. In presence of transaction costs, the optimal composition changes and, more important, it turns out that the frequency of transactions must be reduced. This simple observation leads to the definition of an optimal lag between two rearrangement of the portfolio. This idea is tested against an investment in a risky asset and a risk-less one. The price of the first is proportional to NYSE composite index while the price of the second grows according to the American Discount Rate. An application to a portfolio of many stochastically equivalent securities is also provided.
No associations
LandOfFree
Optimal lag in dynamical investments does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.
If you have personal experience with Optimal lag in dynamical investments, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Optimal lag in dynamical investments will most certainly appreciate the feedback.
Profile ID: LFWR-SCP-O-508703