As long as the borrowing rate is lower than the expected return on SPY, leveraging will always improve your return.
Maybe not what you meant, but this wording is too strong. If you leverage high enough to exceed the Kelly bet size by 2x or more, then your long-run portfolio value will be zero.
Yes, you’re right. I’ll weaken the claim to 1.1x SPY will beat SPY in expected return historically and in almost all reasonable contexts. Certainly often enough to invalidate the incorrect EMH stated above.
My statement was motivated by the single time period investment model, as is considered in the standard mean-variance diagram of modern portfolio theory. On that diagram, as long as the risk free rate is below the market portfolio, you can draw a straight line between them and once you go beyond the market portfolio, you’ll always have higher expected return all the way to infinity. But a single time period is not the best way to model long-term investing.
Maybe not what you meant, but this wording is too strong. If you leverage high enough to exceed the Kelly bet size by 2x or more, then your long-run portfolio value will be zero.
Yes, you’re right. I’ll weaken the claim to 1.1x SPY will beat SPY in expected return historically and in almost all reasonable contexts. Certainly often enough to invalidate the incorrect EMH stated above.
My statement was motivated by the single time period investment model, as is considered in the standard mean-variance diagram of modern portfolio theory. On that diagram, as long as the risk free rate is below the market portfolio, you can draw a straight line between them and once you go beyond the market portfolio, you’ll always have higher expected return all the way to infinity. But a single time period is not the best way to model long-term investing.