Initial efficiency of investment for the general market

Elza Erkip, Thomas M. Cover

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

We investigate how one invests in the stock market X when there is a rate constraint on the side information V. The doubling function Δ(R) is the maximum increase in the doubling rate when V is described to the investor at rate R. The initial efficiency Δ′(0) is the largest possible increase in the doubling function per bit of description. We introduce the linearized maximal correlation and use it to provide a lower bound for the initial efficiency. We also show that the initial efficiency is bounded above by the square of the Hirschfeld-Gebelein-Renyi maximal correlation between the side information V and the market X. We can use these bounds to find the initial efficiency for V = X and for the horse race market.

Original languageEnglish (US)
Title of host publicationIEEE International Symposium on Information Theory - Proceedings
PublisherIEEE
Pages283
Number of pages1
StatePublished - 1997
EventProceedings of the 1997 IEEE International Symposium on Information Theory - Ulm, Ger
Duration: Jun 29 1997Jul 4 1997

Other

OtherProceedings of the 1997 IEEE International Symposium on Information Theory
CityUlm, Ger
Period6/29/977/4/97

Fingerprint

Doubling
Side Information
Stock Market
Lower bound
Market

ASJC Scopus subject areas

  • Electrical and Electronic Engineering
  • Applied Mathematics
  • Modeling and Simulation
  • Theoretical Computer Science
  • Information Systems

Cite this

Erkip, E., & Cover, T. M. (1997). Initial efficiency of investment for the general market. In IEEE International Symposium on Information Theory - Proceedings (pp. 283). IEEE.

Initial efficiency of investment for the general market. / Erkip, Elza; Cover, Thomas M.

IEEE International Symposium on Information Theory - Proceedings. IEEE, 1997. p. 283.

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Erkip, E & Cover, TM 1997, Initial efficiency of investment for the general market. in IEEE International Symposium on Information Theory - Proceedings. IEEE, pp. 283, Proceedings of the 1997 IEEE International Symposium on Information Theory, Ulm, Ger, 6/29/97.
Erkip E, Cover TM. Initial efficiency of investment for the general market. In IEEE International Symposium on Information Theory - Proceedings. IEEE. 1997. p. 283
Erkip, Elza ; Cover, Thomas M. / Initial efficiency of investment for the general market. IEEE International Symposium on Information Theory - Proceedings. IEEE, 1997. pp. 283
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