Kelly gambling, information rate, and bet hedging in evolutionary models: a reconsideration

We will critically review the insights of Kelly in what was arguably the first convincing attempt at adopting concepts and tools from information theory for analysis in a different field – and this in light of Shannon’s famous caution against jumping on ‘the bandwagon’ of information theory. How deep were the links that Kelly had identified and what was perhaps missed? We will then see how such ideas -- optimizing the expected exponential rate of return, proportional betting and the use of a side-information channel – were treated in the context of evolutionary models of fitness maximization under fluctuating environments. Possible analytic limitations of such models and the potential for further extensions will be discussed.