DEFINITION of 'PostModern Portfolio Theory  PMPT'
A portfolio optimization methodology that uses the downside risk of returns instead of the mean variance of investment returns used by modern portfolio theory. The difference lies in each theory's definition of risk, and how that risk influences expected returns. PostModern Portfolio Theory (PMPT) uses the standard deviation of negative returns as the measure of risk, while modern portfolio uses the standard deviation of all returns as a measure of risk.
BREAKING DOWN 'PostModern Portfolio Theory  PMPT'
The differences between risk, as defined by the standard deviation of returns, between the postmodern portfolio theory and modern portfolio theory is the key factor in portfolio construction. Modern portfolio theory assumes that symetrical risk whereas PMPT assumes asymetrical risk. Downside risk captures what investors fear: having negative returns. After all, high positive returns are viewed as a good thing!

SafetyFirst Rule
Within the context of postmodern and modern portfolio theory, ... 
MeanVariance Analysis
The process of weighing risk against expected return. Mean variance ... 
Portfolio Return
The monetary return experienced by a holder of a portfolio. Portfolio ... 
Market Segmentation Theory
A modern theory pertaining to interest rates stipulating that ... 
Accelerator Theory
An economic theory that suggests that as demand or income increases ... 
Sharpe Ratio
The Sharpe Ratio is a measure for calculating riskadjusted return, ...

Managing Wealth
Financial Concepts: The Optimal Portfolio
The optimal portfolio concept falls under the modern portfolio theory. The theory assumes (among other things) that investors fanatically try to minimize risk while striving for the highest ... 
Trading
Modern Portfolio Theory: Why It's Still Hip
See why investors today still follow this old set of principles that reduce risk and increase returns through diversification. 
Managing Wealth
Manage Investments And Modern Portfolio Theory
Modern Portfolio Theory suggests a static allocation which could be detrimental in declining markets, making it necessary for continuous risk assessment. Downside risk protection may not be the ... 
Investing
Understanding Modern Portfolio Theory
Modern portfolio theory describes ways of diversifying assets in a portfolio in order to maximize the expected return given the ownerâ€™s risk tolerance. 
Trading
7 Controversial Investing Theories
We take a closer look at the theories that attempt to explain and influence the market. 
Managing Wealth
Calculating Portfolio Variance
Portfolio variance is a measure of a portfolioâ€™s volatility, and is a function of two variables. 
Managing Wealth
Redefining Investor Risk
Changing the way you think about time and risk can change the way you invest. 
Investing
How Investment Risk Is Quantified
FInancial advisors and wealth management firms use a variety of tools based in Modern portfolio theory to quantify investment risk. 
Trading
Arbitrage Pricing Theory: It's Not Just Fancy Math
What are the main ideas behind arbitrage pricing theory? We provide a simple explanation of the model and how to use it. 
Managing Wealth
The Workings Of Equity Portfolio Management
Achieve analytical efficiency by applying your evaluation to a key set of stocks.

Why is risk return tradeoff important in designing a portfolio?
Learn how the risk return tradeoff is used in the construction of portfolios, and how modern portfolio theory seeks to diversify ... Read Answer >> 
What are the advantages of portfolio planning with the efficient frontier?
Learn about modern portfolio theory and the efficient frontier. Understand the advantages of portfolio planning with the ... Read Answer >> 
How is risk aversion measured in Modern Portfolio Theory (MPT)?
Find out how risk aversion is measured in modern portfolio theory (MPT), how it is reflected in the market and how MPT treats ... Read Answer >> 
Where did Modern Portfolio Theory (MPT) come from?
Learn about modern portfolio theory, or MPT, and its origins. MPT has become a standard paradigm through which investors ... Read Answer >> 
How reliable is the mean variance analysis of an investment?
Learn how mean variance analysis is used to determine the historical volatility of an asset and how future volatility may ... Read Answer >> 
How is correlation used in modern portfolio theory?
Discover how modern portfolio theory and the efficient frontier use correlation between investment assets to predict an optimal ... Read Answer >>