Shannon’s Demon system with daily rebalance ?

O

Oppz

Hi

Just started to read about Shannon’s Demon principle, and find it quite interesting. Has anyone explored using just a few uncorrelated assets and made daily rebalance? Of course with assets that are commission free.

Try to make a internet search for this, but did only come up with some research paper.
 
The problem is that you’re generating rebalancing returns from a portfolio, so it’s akin trading a short gamma position. You going to on average make money and generate massive losses on large sequential moves. This said, it’s known in finance as volatility pumping and/or « rebalancing bonus »
 
Thomas Cover's Universal Portfolio could be considered an implementation of Shannon's Demon I believe. There is quite a bit of information on the subject if you look up universal portfolios.
It is one of those ideas I always want to explore but always hit some kind of wall.
 
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