Kelly Criterion, my conclusions

My objective with this project was to determine once and for all in my mind if I wanted to use Kelly or some other bet sizing technique in future wagers. I’ve looked at many things and paid attention to the posts at the topic of “Kelly Re-Visited” on “Handicapper Think Tank” at sportsbookreview.com. It’s time to draw some of my conclusions. First, several observations in the pros and cons arena.

•  ·        Kelly has the potential to substantially outgrowing flat bets over a long period of time. (Advantage Kelly.)
• ·        Kelly also limits your losses to a portion of your bankroll. (Advantage Kelly).
• ·        It is also better than a similar system that I devised. It may very will be the optimum approach of maximizing final return (Advantage Kelly.)
• ·        Kelly is dependent on how accurately you can estimate your edge in each wager. (Disadvantage Kelly.)
• ·        If you are dealing with each season independently, you have a limited number of potential bets. Kelly is superior with an unlimited number of future bets. (Disadvantage Kelly).
• ·        Kelly is more fun because it introduces another unknown gamble. (Advantage Kelly.)

There’s something here for everyone. Poster “KVB” summarized it best in an early post, “It really does depend on your goals and time frame”. I kind of view it as the difference between a “gambler” and an “investor”.  If you like risk, and hope to hit it big, you are a gambler and Kelly is for you. If you view sports wagering for its profit-making potential, want to minimize risk, then you are an investor and Kelly is not for you.

The biggest single drawback with Kelly is the need to be able to calculate an accurate edge. I’m convinced that can’t be done in sports betting, but that’s another topic.

One significant note should be added. I chose to simulate a season worth of bets (100 per season) 1,000 times. Kelly would have significantly better results given 1 season with 100,000 bets. But because of KVB’s time frame issue, I chose the 100 per season approach. I’m 73 years old and in poor health. Thus, my time frame is limited, and I must view my horizon is more like 100 bets than 100,000. I’m not sure what my goal is, so I’m going to review the current baseball strategies I’m using for potential changes for the rest of the season.

This completes my Kelly project. Now I need to review my personal strategies. So, it may be a while before I post again. Follow me on Twitter, @ole44bill, to know when I resume.