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Abstract: The growth-optimal portfolio optimization strategy pioneered by Kelly isbased on constant portfolio rebalancing which makes it sensitive to transactionfees. We examine the effect of fees on an example of a risky asset with abinary return distribution and show that the fees may give rise to an optimalperiod of portfolio rebalancing. The optimal period is found analytically inthe case of lognormal returns. This result is consequently generalized andnumerically verified for broad return distributions and returns generated by aGARCH process. Finally we study the case when investment is rebalanced onlypartially and show that this strategy can improve the investment long-termgrowth rate more than optimization of the rebalancing period.



Autor: Yu Feng, Matus Medo, Liang Zhang, Yi-Cheng Zhang

Fuente: https://arxiv.org/







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