1 Nov 2021 | Value Investing Substack NEWS
UBS report on Apple, Bill Ackman documentary, Underbetting with the Kelly Criterion
Subscribe below to get curated market news in your inbox!
HIGHLIGHTS:
Kelly tells you the mathematically optimal bet size given the risk/reward of a bet. When you bet too big, your returns fall. Not risk-adjusted returns, actual returns. Overbet enough and your returns go negative. But when you underbet, you still get most of the returns.
@walt373 A deliberate attempt to underbet, and then hunting for mispricings within the remaining universe - is basically what encapsulates Buffett-ism.
@walt373 To me, Risk represents all loose ends which can potentially lead to permanent losses.
Uncertainty represents all potential permanent loss outcomes whose probabilities are too small to be statistically useful.