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A bound on the financial value of information

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2 Author(s)
Barron, A.R. ; Dept. of Stat., Illinois Univ., Champaign, IL, USA ; Cover, T.M.

It is shown that each bit of information at most doubles the resulting wealth in the general stock-market setup. This information bound on the growth of wealth is actually attained for certain probability distributions on the market investigated by J. Kelly (1956). The bound is shown to be a special case of the result that the increase in exponential growth of wealth achieved with true knowledge of the stock market distribution F over that achieved with incorrect knowledge G is bounded above by the entropy of F relative to G

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Information Theory, IEEE Transactions on  (Volume:34 ,  Issue: 5 )