A class of log-optimal utility functions

Paul Cuff

Research output: Chapter in Book/Report/Conference proceedingConference contribution

1 Scopus citations

Abstract

One of the classic observations in investment theory is that maximizing the expected-log-return of a portfolio results in the greatest long-term growth of wealth. The log-optimal portfolio is both competitively optimal and pathwise dominant. Nevertheless, investment researchers and practitioners don't all latch on to the log-optimal doctrine, even for theoretical guidance. A common alternative is to use a utility function to evaluate an investment strategy. At first glance it seems that any (non-decreasing) utility function would point to the log-optimal portfolio, at least in the limit. This is known not to be the case. In this work we identify sufficient conditions on a utility function that will produce a happy marriage between utility theory and optimal growth-rate of wealth.

Original languageEnglish (US)
Title of host publication2012 Information Theory and Applications Workshop, ITA 2012 - Conference Proceedings
Pages62-63
Number of pages2
DOIs
StatePublished - May 7 2012
Event2012 Information Theory and Applications Workshop, ITA 2012 - San Diego, CA, United States
Duration: Feb 5 2012Feb 10 2012

Publication series

Name2012 Information Theory and Applications Workshop, ITA 2012 - Conference Proceedings

Other

Other2012 Information Theory and Applications Workshop, ITA 2012
CountryUnited States
CitySan Diego, CA
Period2/5/122/10/12

All Science Journal Classification (ASJC) codes

  • Computer Science Applications
  • Information Systems

Cite this

Cuff, P. (2012). A class of log-optimal utility functions. In 2012 Information Theory and Applications Workshop, ITA 2012 - Conference Proceedings (pp. 62-63). [6181818] (2012 Information Theory and Applications Workshop, ITA 2012 - Conference Proceedings). https://doi.org/10.1109/ITA.2012.6181818