I noticed that the Kelly Criterion resembles a ratio between the mean and variance in a continuous probability distribution. Now the mean and variance are important values in portfolio optimization (Modern Portfolio Theory). Is there some relationship between the two since both seek to maximize returns and minimize risk?
2026-03-30 11:02:26.1774868546
Kelly Criterion and mean variance optimization
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Well, what rational person doesn't want to maximise returns and minimise risk?
The Kelly criterion is used in Intertemporal portfolio choice.
From Wiki:
'above' refers to:
Also:
So they seem to both involve maximising log returns
You mentioned Modern Portfolio Theory, which I'm guessing refers to Markowitz mean-variance, criticised by NNT. Markowitz doesn't seem to differentiate.
From Wiki: