Abstract
The chapter presents basic ideas and results related to capital growth theory. It introduces the dynamic securities market model with an infinite time horizon and self-financing strategies defined in terms of investment proportions. The highlight of the chapter is the study of the problem of growth optimal investments. It shows that the log-optimal portfolio rule is the solution to this problem in the class of simple (constant proportions) strategies. The chapter concludes with the classical example of the horse race model and the Kelly gambling rule of “betting your beliefs.”
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© 2015 Springer International Publishing Switzerland
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Evstigneev, I.V., Hens, T., Schenk-Hoppé, K.R. (2015). Capital Growth Theory. In: Mathematical Financial Economics. Springer Texts in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-16571-4_17
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DOI: https://doi.org/10.1007/978-3-319-16571-4_17
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-16570-7
Online ISBN: 978-3-319-16571-4
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