UNIT 4
Fractional Kelly
Half- or quarter-Kelly reduces drawdown and sensitivity to bad estimates.
Fraction½ KellySmoother path
A practical sizing range below the theoretical full-Kelly fraction.
- Edges are uncertain
- Drawdown tolerance is limited
- Still depends on the same model
- Does not fix hidden correlation
Using full Kelly because the spreadsheet shows the highest median ending wealth.
Fractional sizing is a robustness choice, not a new source of edge.
60-SECOND CHEAT SHEET
Remember this.
- 1Start below full Kelly
- 2More uncertainty → smaller fraction
- 3Re-estimate after costs