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Long-term investors measure growth rate, but eat compound wealth. The four determinants of terminal wealth ratio (randomly selected portfolio’s terminal wealth divided by benchmark terminal wealth) and...

We will show that the single best metric predicting drawdown risk is portfolio volatility normalized (divided) by Sharpe ratio i.e. fraction of full Kelly allocation. We first derive the formulas for drawdown...

We will see how the diversification assessment framework provided by conventional finance theory is not applicable to what long-term investors really care about – compounded returns. As long-term investors...

Expected return is at the center of financial analysis. But when you hear expected return, you can’t be sure if it is geometric expectation (time average) or arithmetic expectation (ensemble average)....