Proportional Betting and Logarithmic Utility

Tim Wuu

Choose ln( ) x as the Utility Function,
1 1
1
1
( ) ln(1 ) ln((1 ) (1 )) ... ln(1 )
0 1
ln(1 ) [( 1)ln(1 ) ln(1 )] ... ln(1 )
0 1
1 1
( ) ( )
0 1 1 1 1
n n n n n n
n n n
n
n
n n n
E p l p q l l q l
n
n n n
np l p q n l l nq l
n
n n np n
E p q
l l l

| | | | | |
- = + + + + +
| | |
\ . \ . \ .
| | | | | |
= + + + + + +
| | |
\ . \ . \ .
| | | |
' - = +
|
+ +
\ . \
1 1
1 1
1
...
1
1
( 1) ...
0 1 1 1
1
( 1) ...
1 1 1
0
( 1) ...
1
1
1
n
n n n
n n n
n n
n nq
n l
n n n
np n p q pq
n l
n n n
nq n q p qp
n n l
n n
nq n q p q
n n
l
l

| |
+
| |

. \ .
| | | | | |

= + + +
` | | |
+
\ . \ . \ . )
| | | | | |

+ + +
` | | |

\ . \ . \ . )
=
| | | |
+ + +
| |

\ . \ .
=
+
1
1
1 1
1
1 1
1 1
1
( 1) ...
0 1 1
let
1
1
n
n k n k
n
n n n k n k
n n
n k k
n n
n n k n k
n n
p kq p
k
n n n n
np n p q pq kp q
n n k
q p
n n
p k k
k k
l
n n l
p k k
n k n k
o
o o
o o



| | | |
| |
\ . \ .
=
| | | | | | | |
+ + +
| | | |

\ . \ . \ . \ .
=
| | | |
| |

\ . \ .
= =
+ | | | |
| |

\ . \ .

1
1 2
1 2
1
1
2 ... ( 1)
1 2 1 0
1 1 1 1
...
1 2 1 0
(1 )
( 1)
1
n
n k
n n
n n
n
n
k
n
n
k
n k
n n n n
n n
n n
n n n n
n
n n
n
n
k
k
n n
n n
n n
o
o o o
o o o
o
o
o

| |
|

\ .
| | | | | | | |
= + + + +
| | | |

\ . \ . \ . \ .
| | | | | | | |

= + + + +
` | | | |

\ . \ . \ . \ . )
= +
| |
|
\ .
| | | |
= +
|

\ . \

1
1
1 2
1 2
...
1
= ...
1 1 0
2 ... ( 1)
1 2 1 0
1 1
(1 ) .
1 2
n
n n
n n
n n n
n
n n n n
n n n n
n n
n n n n
n n
n n
n n
n n
n n
o o
o o o
o o o
o o o

| |
+ +
| |
. \ .
| | | | | | | |

+ + + +
` | | | |

\ . \ . \ . \ . )
| | | | | | | |

+ + + +
` | | | |

\ . \ . \ . \ . )
| | | |
= + + +
| |

\ . \ .
1
1
1
1
1 1
..
1 0
(1 ) (1 )
(1 )
(1 ) 1
1 (1 )
1 / 1
1 1 /
n n
n
n
n
n n
n n
n
n l
l n
q p
l p q
q p
o
o o
o o
o o
o
o
o
o

| | | |

+ +
` | |
\ . \ . )
= + +
= +
+
= =
+ +

= = =
+ +