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Dynamic construction of optimal portfolio is investigated. Multiple assets are allocated and rebalanced periodically based on different principles. We develop several dynamic allocation strategies to maximize long-term portfolio value based on Kelly's approach related to mutual information. We show that the resulting asset allocation strategy outperforms the traditional approaches and produces an...
This paper discusses an optimal equity growth trading strategy based on mutual information in communication theory and examines its application for asset allocation in financial investment. Specifically, The asset allocation formula derived from channel capacity of a binary symmetric channel (Kelly's formula) is used to determine the optimal fraction of equity to be invested in a repeated trading...
This paper examines the application of data fusion and probabilistic reasoning for investment decision and its performance evaluation. Specifically, Bayesian networks are used to model the qualitative and quantitative relationships between various factors that affect the dynamics of equity index (S&P 500) for predictive analysis. The resulting assessments are applied to trading decisions utilizing...
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