Estimation of a portfolio to maximize the expected return using the Kelly criterion in the Colombian stock market [Utilización del criterio Kelly para optimizar la rentabilidad de un portafolio en el mercado accionario Colombiano]

The main objective of an investor when forming a portfolio of shares, is to obtain a return on the invested capital while distributing the risk. The most popular method so far to do this is the one proposed by Markowitz (Markowitz, 1959), which minimizes the variance of the portfolio for a fixed val...

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Fecha de publicación:: 2018

Institución:: Universidad de Medellín

Repositorio:: Repositorio UDEM

Idioma:: spa

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network_acronym_str	REPOUDEM2
network_name_str	Repositorio UDEM
repository_id_str
dc.title.spa.fl_str_mv	Estimation of a portfolio to maximize the expected return using the Kelly criterion in the Colombian stock market [Utilización del criterio Kelly para optimizar la rentabilidad de un portafolio en el mercado accionario Colombiano]
title	Estimation of a portfolio to maximize the expected return using the Kelly criterion in the Colombian stock market [Utilización del criterio Kelly para optimizar la rentabilidad de un portafolio en el mercado accionario Colombiano]
spellingShingle	Estimation of a portfolio to maximize the expected return using the Kelly criterion in the Colombian stock market [Utilización del criterio Kelly para optimizar la rentabilidad de un portafolio en el mercado accionario Colombiano] BVC; Kelly Criterion; Portfolio Selection
title_short	Estimation of a portfolio to maximize the expected return using the Kelly criterion in the Colombian stock market [Utilización del criterio Kelly para optimizar la rentabilidad de un portafolio en el mercado accionario Colombiano]
title_full	Estimation of a portfolio to maximize the expected return using the Kelly criterion in the Colombian stock market [Utilización del criterio Kelly para optimizar la rentabilidad de un portafolio en el mercado accionario Colombiano]
title_fullStr	Estimation of a portfolio to maximize the expected return using the Kelly criterion in the Colombian stock market [Utilización del criterio Kelly para optimizar la rentabilidad de un portafolio en el mercado accionario Colombiano]
title_full_unstemmed	Estimation of a portfolio to maximize the expected return using the Kelly criterion in the Colombian stock market [Utilización del criterio Kelly para optimizar la rentabilidad de un portafolio en el mercado accionario Colombiano]
title_sort	Estimation of a portfolio to maximize the expected return using the Kelly criterion in the Colombian stock market [Utilización del criterio Kelly para optimizar la rentabilidad de un portafolio en el mercado accionario Colombiano]
dc.contributor.affiliation.spa.fl_str_mv	Universidad de Antioquia, Medellín, Colombia; Universidad Nacional de Colombia, Colombia; Universidad de San Buenaventura, Medellín, Colombia; Universidad de Medellín, Colombia
dc.subject.keyword.eng.fl_str_mv	BVC; Kelly Criterion; Portfolio Selection
topic	BVC; Kelly Criterion; Portfolio Selection
description	The main objective of an investor when forming a portfolio of shares, is to obtain a return on the invested capital while distributing the risk. The most popular method so far to do this is the one proposed by Markowitz (Markowitz, 1959), which minimizes the variance of the portfolio for a fixed value of expected return. In this paper, the Kelly criterion is presented as an alternative to Markowitz's in order to maximize the expected return. The process for estimating a portfolio under this methodology is shown using the data of the COLCAP index from the Colombian stock exchange. In this case, it was found that the Kelly criterion gave a much less diversified portfolio with few shares, which generated a greater return than the passive strategy of investing in the COLCAP index. © 2018.
publishDate	2018
dc.date.accessioned.none.fl_str_mv	2018-04-13T16:31:53Z
dc.date.available.none.fl_str_mv	2018-04-13T16:31:53Z
dc.date.created.none.fl_str_mv	2018
dc.type.eng.fl_str_mv	Article
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dc.identifier.issn.none.fl_str_mv	7981015
dc.identifier.uri.none.fl_str_mv	http://hdl.handle.net/11407/4533
identifier_str_mv	7981015
url	http://hdl.handle.net/11407/4533
dc.language.iso.none.fl_str_mv	spa
language	spa
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dc.relation.ispartofes.spa.fl_str_mv	Espacios
dc.relation.references.spa.fl_str_mv	Fama, E.F., The Behavior of Stock-Market Prices (1965) The Journal of Business, 38, pp. 34-105. , http://doi.org/10.2307/2350752; Hung, J., (2010) Betting with the Kelly Criterion, , https://www.math.washington.edu/~morrow/336_10/papers/jane.pdf; Kelly, J.L., A New interpretation of Information rate (1956) Bell System Technical Journal, 35, pp. 917-926. , https://www.princeton.edu/~wbialek/rome/refs/kelly_56.pdf; Kim, G., Jung, S., A Portfolio Comparison of a Kelly Criterion with Markowitz Model: A Case Study with KOSPI 200 (2014) In Proceedings of the 2014 International Conference on Industrial Engineering and Operations Management Bali, , http://ieomsociety.org/ieom2014/pdfs/192.pdf, Indonesia, January 7-9, 2014. Bali; Kim, G., Suhee, J., The Construction of the Optimal Investment Portfolio Using the Kelly Criterion (2013) World Journal of Social Sciences, 3, pp. 15-26. , file:///C:/Users/Sebas/AppData/Local/MendeleyLtd./MendeleyDesktop/Downloaded/Kim,Suhee-2013-TheConstructionoftheOptimalInvestmentPortfolioUsingtheKellyCriterion.pdf; Laureti, P., Medo, M., Zhang, Y.-C., Analysis of Kelly-optimal portfolios (2009) Quantitative Finance, 10 (7), pp. 689-697. , http://doi.org/10.1080/14697680902991619; Lundström, C., (2014) Money ;anagement with Optimal Stopping of Losses for Maximizing the Returns of Futures Trading, , http://ideas.repec.org/p/hhs/umnees/0884.html, Umeá University, Department of Economics; Lv, Y., Meister, B.K., Implication of the Kelly Criterion for Multi-Dimensional Processes (2010) International Journal of Theoretical & Applied Finance, 13 (1), pp. 93-112. , http://doi.org/10.1142/S0219024910005693; Maclean, L.C., Zhao, Y., Ziemba, W.T., Optimal Capital Growth with Convex Shortfall Penalties (2016) Quantitative Finance, 16 (1), pp. 101-117. , http://doi.org/10.1080/14697688.2015.1059469; Markowitz, H., Portfolio Selection (1959) The Journal of Finance, 7 (1), pp. 77-91. , http://doi.org/10.1111/j.1540-6261.1952.tb01525.x; Osorio, R., A prospect-theory approach to the Kelly criterion for fat-tail portfolios: the case of Student's t-distribution (2009) Wilmott Journal, 1 (2), pp. 101-107. , http://doi.org/10.1002/wilj.7; Patterson, S., Old Pros Size Up the Game (2008) Wall Street Journal, pp. A9-A9. , https://www.wsj.com/articles/SB120614130030156085; Phatarfod, R., Kelly Gambling with the Stock Market and Banks (2012) Mathematical Scientist, 37 (2), pp. 132-140. , http://www.scopus.com/inward/record.url?eid=2-s2.0-84871896737&partnerID=40&md5=81627003d6a678fff100a1b438fdf52c; Piotrowski, E.W., Schroeder, M., Kelly criterion revisited: Optimal bets (2007) European Physical Journal B, 57 (2), pp. 201-203. , http://doi.org/10.1140/epjb/e2007-00126-3; Poundstone, W., (2005) Fortune's formula: the untold story of the scientific betting system that beat the casinos and Wall Street, , https://www.mendeley.com/researchpapers/fortunes-formula-untold-story-scientific-betting-system-beat-casinos-wall-street/?utm_source=desktop&utm_medium=1.17.9&utm_campaign=open_catalog&userDocumentId=%7B283cc610-15ab-412b-90d7-b34ff58e569f%7D, Hill and Wang; Rotando, L.M., Thorp, E.O., The Kelly Criterion and the Stock Market (1992) The American Mathematical Monthly, 99 (10), pp. 922-931. , http://doi.org/10.2307/2324484; Scholz, P., (2012) Size matters! How Position Sizing Determines Risk and Return of Technical Timing Strategies, , http://ideas.repec.org/p/zbw/cpqfwp/31.html, Frankfurt School of Finance & Management, Centre for Practical Quantitative Finance (CPQF). Frankfurt School of Finance and Management, Centre for Practical Quantitative Finance (CPQF); Sewell, M., (2011) Money Management, , file:///C:/Users/Sebas/AppData/Local/MendeleyLtd./MendeleyDesktop/Downloaded/Sewell-2011-MoneyManagement.pdf; Subbiah, M., Fabozzi, F.J., Hedge Fund Allocation: Evaluating Parametric and Nonparametric Forecasts Using Alternative Portfolio Construction Techniques (2016) International Review of Financial Analysis, 45, pp. 189-201. , http://doi.org/10.1016/j.irfa.2016.03.003; Thorp, E.O., Optimal Gambling Systems for Favorable Games (1969) Revue de l'Institut International de Statistique / Review of the International Statistical Institute, 37 (3), pp. 273-293. , http://doi.org/10.2307/1402118; Thorp, E.O., Portfolio Choice and the Kelly Criterion (1975) In Stochastic Optimization Models in Finance, pp. 599-619. , http://doi.org/10.1016/B978-0-12-780850-5.50051-4; Thorp, E.O., (1980) The Kelly Money Management System, pp. 91-92. , file:///C:/Users/Sebas/AppData/Local/MendeleyLtd./MendeleyDesktop/Downloaded/Thorp-1980-TheKellyMoneyManagementSystem.pdf, Gambling Times; Thorp, E.O., The Kelly Criterion in Blackjack Sports Betting, and the Stock Market (2008) Handbook of Asset and Liability Management, 1, pp. 385-428. , http://doi.org/http://dx.doi.org/10.1016/B978-044453248-0.50015-0, In S. A. Z. T. Ziemba (Ed.). San Diego: North-Holland; Thorp, E.O., Maclean, L.C., Ziemba, W.T., Understanding the Kelly Criterion (2010) The Kelly Capital Growth Investment Criterion: Theory and Practice, pp. 509-523. , http://doi.org/10.1016/j.jcis.2005.12.025, In E. O. T. Leonard C. MacLean William T. Ziemba (Ed.). Singapore: World Scientific Press; Zambrano, E., Subtle Price Discrimination and Surplus Extraction Under Uncertainty (2014) Journal of Mathematical Economics, 52, pp. 153-161. , http://doi.org/http://dx.doi.org/10.1016/j.jmateco.2013.08.004
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dc.publisher.spa.fl_str_mv	Revista Espacios
dc.publisher.faculty.spa.fl_str_mv	Facultad de Ingenierías
dc.source.spa.fl_str_mv	Scopus
institution	Universidad de Medellín
repository.name.fl_str_mv	Repositorio Institucional Universidad de Medellin
repository.mail.fl_str_mv	repositorio@udem.edu.co
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spelling	2018-04-13T16:31:53Z2018-04-13T16:31:53Z20187981015http://hdl.handle.net/11407/4533The main objective of an investor when forming a portfolio of shares, is to obtain a return on the invested capital while distributing the risk. The most popular method so far to do this is the one proposed by Markowitz (Markowitz, 1959), which minimizes the variance of the portfolio for a fixed value of expected return. In this paper, the Kelly criterion is presented as an alternative to Markowitz's in order to maximize the expected return. The process for estimating a portfolio under this methodology is shown using the data of the COLCAP index from the Colombian stock exchange. In this case, it was found that the Kelly criterion gave a much less diversified portfolio with few shares, which generated a greater return than the passive strategy of investing in the COLCAP index. © 2018.spaRevista EspaciosFacultad de Ingenieríashttps://www.scopus.com/inward/record.uri?eid=2-s2.0-85041556816&partnerID=40&md5=0794e581ec7ffb59812b89cd74eb87e5EspaciosFama, E.F., The Behavior of Stock-Market Prices (1965) The Journal of Business, 38, pp. 34-105. , http://doi.org/10.2307/2350752; Hung, J., (2010) Betting with the Kelly Criterion, , https://www.math.washington.edu/~morrow/336_10/papers/jane.pdf; Kelly, J.L., A New interpretation of Information rate (1956) Bell System Technical Journal, 35, pp. 917-926. , https://www.princeton.edu/~wbialek/rome/refs/kelly_56.pdf; Kim, G., Jung, S., A Portfolio Comparison of a Kelly Criterion with Markowitz Model: A Case Study with KOSPI 200 (2014) In Proceedings of the 2014 International Conference on Industrial Engineering and Operations Management Bali, , http://ieomsociety.org/ieom2014/pdfs/192.pdf, Indonesia, January 7-9, 2014. Bali; Kim, G., Suhee, J., The Construction of the Optimal Investment Portfolio Using the Kelly Criterion (2013) World Journal of Social Sciences, 3, pp. 15-26. , file:///C:/Users/Sebas/AppData/Local/MendeleyLtd./MendeleyDesktop/Downloaded/Kim,Suhee-2013-TheConstructionoftheOptimalInvestmentPortfolioUsingtheKellyCriterion.pdf; Laureti, P., Medo, M., Zhang, Y.-C., Analysis of Kelly-optimal portfolios (2009) Quantitative Finance, 10 (7), pp. 689-697. , http://doi.org/10.1080/14697680902991619; Lundström, C., (2014) Money ;anagement with Optimal Stopping of Losses for Maximizing the Returns of Futures Trading, , http://ideas.repec.org/p/hhs/umnees/0884.html, Umeá University, Department of Economics; Lv, Y., Meister, B.K., Implication of the Kelly Criterion for Multi-Dimensional Processes (2010) International Journal of Theoretical & Applied Finance, 13 (1), pp. 93-112. , http://doi.org/10.1142/S0219024910005693; Maclean, L.C., Zhao, Y., Ziemba, W.T., Optimal Capital Growth with Convex Shortfall Penalties (2016) Quantitative Finance, 16 (1), pp. 101-117. , http://doi.org/10.1080/14697688.2015.1059469; Markowitz, H., Portfolio Selection (1959) The Journal of Finance, 7 (1), pp. 77-91. , http://doi.org/10.1111/j.1540-6261.1952.tb01525.x; Osorio, R., A prospect-theory approach to the Kelly criterion for fat-tail portfolios: the case of Student's t-distribution (2009) Wilmott Journal, 1 (2), pp. 101-107. , http://doi.org/10.1002/wilj.7; Patterson, S., Old Pros Size Up the Game (2008) Wall Street Journal, pp. A9-A9. , https://www.wsj.com/articles/SB120614130030156085; Phatarfod, R., Kelly Gambling with the Stock Market and Banks (2012) Mathematical Scientist, 37 (2), pp. 132-140. , http://www.scopus.com/inward/record.url?eid=2-s2.0-84871896737&partnerID=40&md5=81627003d6a678fff100a1b438fdf52c; Piotrowski, E.W., Schroeder, M., Kelly criterion revisited: Optimal bets (2007) European Physical Journal B, 57 (2), pp. 201-203. , http://doi.org/10.1140/epjb/e2007-00126-3; Poundstone, W., (2005) Fortune's formula: the untold story of the scientific betting system that beat the casinos and Wall Street, , https://www.mendeley.com/researchpapers/fortunes-formula-untold-story-scientific-betting-system-beat-casinos-wall-street/?utm_source=desktop&utm_medium=1.17.9&utm_campaign=open_catalog&userDocumentId=%7B283cc610-15ab-412b-90d7-b34ff58e569f%7D, Hill and Wang; Rotando, L.M., Thorp, E.O., The Kelly Criterion and the Stock Market (1992) The American Mathematical Monthly, 99 (10), pp. 922-931. , http://doi.org/10.2307/2324484; Scholz, P., (2012) Size matters! How Position Sizing Determines Risk and Return of Technical Timing Strategies, , http://ideas.repec.org/p/zbw/cpqfwp/31.html, Frankfurt School of Finance & Management, Centre for Practical Quantitative Finance (CPQF). Frankfurt School of Finance and Management, Centre for Practical Quantitative Finance (CPQF); Sewell, M., (2011) Money Management, , file:///C:/Users/Sebas/AppData/Local/MendeleyLtd./MendeleyDesktop/Downloaded/Sewell-2011-MoneyManagement.pdf; Subbiah, M., Fabozzi, F.J., Hedge Fund Allocation: Evaluating Parametric and Nonparametric Forecasts Using Alternative Portfolio Construction Techniques (2016) International Review of Financial Analysis, 45, pp. 189-201. , http://doi.org/10.1016/j.irfa.2016.03.003; Thorp, E.O., Optimal Gambling Systems for Favorable Games (1969) Revue de l'Institut International de Statistique / Review of the International Statistical Institute, 37 (3), pp. 273-293. , http://doi.org/10.2307/1402118; Thorp, E.O., Portfolio Choice and the Kelly Criterion (1975) In Stochastic Optimization Models in Finance, pp. 599-619. , http://doi.org/10.1016/B978-0-12-780850-5.50051-4; Thorp, E.O., (1980) The Kelly Money Management System, pp. 91-92. , file:///C:/Users/Sebas/AppData/Local/MendeleyLtd./MendeleyDesktop/Downloaded/Thorp-1980-TheKellyMoneyManagementSystem.pdf, Gambling Times; Thorp, E.O., The Kelly Criterion in Blackjack Sports Betting, and the Stock Market (2008) Handbook of Asset and Liability Management, 1, pp. 385-428. , http://doi.org/http://dx.doi.org/10.1016/B978-044453248-0.50015-0, In S. A. Z. T. Ziemba (Ed.). San Diego: North-Holland; Thorp, E.O., Maclean, L.C., Ziemba, W.T., Understanding the Kelly Criterion (2010) The Kelly Capital Growth Investment Criterion: Theory and Practice, pp. 509-523. , http://doi.org/10.1016/j.jcis.2005.12.025, In E. O. T. Leonard C. MacLean William T. Ziemba (Ed.). Singapore: World Scientific Press; Zambrano, E., Subtle Price Discrimination and Surplus Extraction Under Uncertainty (2014) Journal of Mathematical Economics, 52, pp. 153-161. , http://doi.org/http://dx.doi.org/10.1016/j.jmateco.2013.08.004ScopusEstimation of a portfolio to maximize the expected return using the Kelly criterion in the Colombian stock market [Utilización del criterio Kelly para optimizar la rentabilidad de un portafolio en el mercado accionario Colombiano]Articleinfo:eu-repo/semantics/articlehttp://purl.org/coar/version/c_970fb48d4fbd8a85http://purl.org/coar/resource_type/c_6501http://purl.org/coar/resource_type/c_2df8fbb1Universidad de Antioquia, Medellín, Colombia; Universidad Nacional de Colombia, Colombia; Universidad de San Buenaventura, Medellín, Colombia; Universidad de Medellín, ColombiaArango Arango M.A., Alzate López S., Guzmán Aguilar D.S.Arango Arango, M.A., Universidad de Antioquia, Medellín, Colombia, Universidad Nacional de Colombia, Colombia; Alzate López, S., Universidad de San Buenaventura, Medellín, Colombia; Guzmán Aguilar, D.S., Universidad de Medellín, ColombiaBVC; Kelly Criterion; Portfolio SelectionThe main objective of an investor when forming a portfolio of shares, is to obtain a return on the invested capital while distributing the risk. The most popular method so far to do this is the one proposed by Markowitz (Markowitz, 1959), which minimizes the variance of the portfolio for a fixed value of expected return. In this paper, the Kelly criterion is presented as an alternative to Markowitz's in order to maximize the expected return. The process for estimating a portfolio under this methodology is shown using the data of the COLCAP index from the Colombian stock exchange. In this case, it was found that the Kelly criterion gave a much less diversified portfolio with few shares, which generated a greater return than the passive strategy of investing in the COLCAP index. © 2018.http://purl.org/coar/access_right/c_16ec11407/4533oai:repository.udem.edu.co:11407/45332020-05-27 16:27:06.8Repositorio Institucional Universidad de Medellinrepositorio@udem.edu.co

Estimation of a portfolio to maximize the expected return using the Kelly criterion in the Colombian stock market [Utilización del criterio Kelly para optimizar la rentabilidad de un portafolio en el mercado accionario Colombiano]

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