Fortune's Formula

Fortune's Formula

The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street

Book - 2005
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Publisher: New York : Hill & Wang, 2005
ISBN: 9780809046379
Characteristics: x, 386 p. : ill


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May 02, 2015

First read this in 2008 right before the Great Recession. Some mathematician/scientists who figured out how to beat the casinos, and the biggest one of them all - Wall Street. A great read covering a lot of grounds on hedge fund trading developments, particularly on the Kelly Criterion. Searching thru the web, here is a good link on Kelly:

Near the end of the book, it listed Professor Shannon's portfolio. It only had 10 stocks and 81% from a single stock as of 1/21/81. Either he was a great stock broker (as the author believed) or extremely lucky. Those scientists are the fathers in algorithmic program trading and Quants with ultra fast computers in Michael Lewis's 2014 "Flash Boys" and Scott Patterson's "The Quants."

johnf108 Dec 19, 2012

More about Shannon and a mention of his work with portfolios, can be found in the 2012 book 'The Logician and the Engineer' [Boole and Shannon] by the very clear mathematics writer Paul Nahin.

Jun 08, 2012

Compares gambling with investing in the stock market and the use of math to gain an advantage. Even with a "sure thing" bets don't always payoff and you need a money manegement system to keep from going broke.


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May 02, 2015

In its simplest form, the Kelly Criterion is stated as follows:

The optimal Kelly wager = (p*(b+1)—1) / b where p is the probability (% chance of an event happening) and b is the odds received upon winning ($b per every $1 wagered).

It was Ed Thorp who first applied the Kelly Criterion in blackjack and then in the stock market.

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