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- Title
Kelly Betting on Horse Races with Uncertainty in Probability Estimates.
- Authors
Metel, Michael R.
- Abstract
We investigate the problem of gambling with uncertainty in outcome probabilities. Stochastic optimization models are proposed for optimal investing on events with mutually exclusive outcomes when probabilities are estimated using multinomial logistic regression. Special attention is given to the case of there being two outcomes and the general case of many outcomes. An empirical study using simulated data was conducted where the loss of return from probability estimation error was observed, and superior returns were achieved taking it into consideration.
- Subjects
HORSE race betting; STOCHASTIC models; GAMES of chance; SAMPLING errors; UNCERTAINTY
- Publication
Decision Analysis, 2018, Vol 15, Issue 1, p47
- ISSN
1545-8490
- Publication type
Article
- DOI
10.1287/deca.2017.0359