Naslov
Kelly’s investment criterion – simulation scenarios investigation

Autori
Munđar, D.

Vrsta, podvrsta i kategorija rada
Sažeci sa skupova, sažetak, znanstveni

Izvornik
Book of abstracts of FEB Zagreb 14th International Odyssey Conference on Economics and Business / Načinović Braje, I. - Zagreb : Ekonomski fakultet Sveučilišta u Zagrebu, 2023, 1-1

Skup
14th International Odyssey Conference on Economics and Business

Mjesto i datum
Online ; Poreč, Hrvatska, 10.05.2023. - 13.05.2023

Vrsta sudjelovanja
Predavanje

Vrsta recenzije
Recenziran

Ključne riječi
Kelly’s criterion, investment decision-making, teaching financial mathematics, financial simulation, personal finance

Sažetak
Financial literacy and effective personal finance decision making are crucial for long term financial well-being of every family, also having positive effect on national economies. Financial mathematics as part of undergraduate studies of economics play a crucial role in enhancement of associate knowledge in student population, and through dissemination also in general population. Conducted research aimed to improve understanding of personal financial decisions’ effects in case of investment with uncertain consequences on long term financial well-being. Research is conducted as part of undergraduate teaching on financial mathematics. Especially, this presentation demonstrates use of Kelly’s criterion for decision about appropriate portion of available financial budget to invest in case of series of investment opportunities with unsecure future outcomes. The criterion is originally derived to achieve maximal expected long-term return. This reach investigates and compares some properties of different investment strategies. Besides strategy based on Kelly’s criterion, four other strategies are analyzed, and final investment results are compared. In every strategy investor have the same initial budget, and in every step (45 steps – symbolizing 45 investment years) decides about a size of investment (as part of available budget). In each step investment can produce profit equal to investment or total loss of investment with predefined probabilities. To compare investment strategies, simulation of 1.000 instances of 45 random outcomes from same random variable with positive expected value is generated (probability of profit: 2/3). For each strategy are observed or calculated: minimal value, lower quartile, median value, upper quartile, maximal value and average final value of budget, rate of total loss of capital (bankruptcy rate), rate of partial loss of capital (final loss). In average strategy based on Kelly’s formula, as expected shows best results. Conclusion of the research is that in the long run investment under Kelly’s criterion is appropriate, but there isn’t a guaranty that the results of investment strategy are going to be optimal. In our case, strategy with Kelly’s criterion had loss rate of 11.9%, with 0% bankruptcy rate.

Izvorni jezik
Engleski

Znanstvena područja
Matematika, Ekonomija, Obrazovne znanosti (psihologija odgoja i obrazovanja, sociologija obrazovanja, politologija obrazovanja, ekonomika obrazovanja, antropologija obrazovanja, neuroznanost i rano učenje, pedagoške discipline)

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