I do think the basic idea of reducing exposure is valid. I don’t assume a constant return distribution, so in principle, the optimal Kelly fraction for an asset can vary over time. Risk-parity portfolios like the one I described in How to Lose a Fair Game did seem to generate a little alpha due to the volatility adjustments when I backtested them.
I do think the basic idea of reducing exposure is valid. I don’t assume a constant return distribution, so in principle, the optimal Kelly fraction for an asset can vary over time. Risk-parity portfolios like the one I described in How to Lose a Fair Game did seem to generate a little alpha due to the volatility adjustments when I backtested them.