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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (27185)	6/30/2007 5:34:16 PM
From: Madharry	Read Replies (1) of 78705

I researched kelly criteria at length read fortunes formula which i found to be a hoot but real useful. Kelly's criteria i think is much more applicable to horseracing or straight win/lose propositions than anything else but thorp is a sharp guy so he my have some adaptation that works. I have a math background and looked at kelly's original article but i couldnt figure it out. One of the big problems in using this criteria is that its based on probability of winning and i think thats difficult to predict that probablity accurately in most most mergers, and most stock market plays. although thorp made a lot of his money in pricing warrrants correctly, and there you could price warrants based on a particular model fairly accurately and there were a lot mispriced warrants at the time. also thorp went into debt to buy att stock and short the spinoffs as his odds of winning was 100%. Not to many opportunities like that. Now if you do have expertise in likely outcomes of merger -what is your feeling about the trib merger going through? according to barrons that represents a 30% annualized return if it comes to fruition as planned.

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