Journal of Investment Strategies

Risk.net

Confidence intervals for the Kelly criterion

Euan C. Sinclair

ABSTRACT

Investing according to the Kelly criterion will theoretically outperform any other sizing strategy. However, the value of the optimal fraction will generally need to be estimated from empirical data. This means that the estimate will invariably have a degree of uncertainty attached to it. In this paper the authors show how to calculate the variance of the estimated Kelly criterion ratio.