This study analyzes the performance of the growth optimal Kelly portfolio on the Norwegian
stock market from February 2003 through December 2022. To measure the strategy’s alpha,
we employ the Capital Asset Pricing Model, Fama French’s three-factor model and Carhart’s
four-factor model. The Kelly portfolio generates a higher annual growth rate than the
benchmark, and consequently a higher ending wealth level. Our results indicate that the
strategy generates an annualized alpha of 16.8%, significant on a 1% level. However, the
models show very poor explanatory power, prohibiting us from drawing a meaningful
conclusion. Furthermore, when accounting for transaction costs, the portfolio no longer
achieves a higher wealth level than the benchmark, and the corresponding alpha is only
significant on a 10% level, indicating that the strategy is unable to generate risk-adjusted
excess returns in the real world.nhhma
