An Empirical Comparison between Kelly Criterion and Vince's Optimal F

摘要

In this paper, we compare the differences between traditional Kelly Criterion and Vince's optimal f through backtesting actual financial transaction data. We apply a momentum trading strategy to the Taiwan Weighted Index Futures, and analyze its profit-and-loss vectors of Kelly Criterion and Vince's optimal f, respectively. Our numerical experiments demonstrate that there is nearly 90% chance that the difference gap between the bet ratio recommended by Kelly criterion and and Vince's optimal f lies within 2%. Therefore, in the actual transaction, the values from Kelly Criterion could be taken directly as the optimal bet ratio for funds control.