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Kelly Fraction and Leverage May Lead to Underperformance or Even Ruin [Premium Articles]

In this blog post it is shown that in the case of S&P 500 Index, use of the Kelly ratio has not provided protection to investors from large drawdowns and that use of Kelly leverage has led to total ruin. It turns out that the Kelly ratio is useful only during an extended streak of losers and Kelly leverage is useful only during an extended streak of winners . . .

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