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!

Standard Deviation
1. A measure of the dispersion of a set of data from its mean. ... 
Expected Return
The amount one would anticipate receiving on an investment that ... 
Risk
The chance that an investment's actual return will be different ... 
Modern Portfolio Theory  MPT
A theory on how riskaverse investors can construct portfolios ... 
Volatility
1. A statistical measure of the dispersion of returns for a given ... 
Return
The gain or loss of a security in a particular period. The return ...

Bonds & Fixed Income
Find The Highest Returns With The Sharpe Ratio
Learn how to follow the efficient frontier to increase your chances of successful investing. 
Mutual Funds & ETFs
Understanding Volatility Measurements
How do you choose a fund with an optimal riskreward combination? We teach you about standard deviation, beta and more! 
Active 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. 
Retirement
Smart Ways to Tap Your Retirement Portfolio
A rundown of strategies, from what to liquidate first to how much to withdraw, along with their tax consquences. 
Term
How Market Segments Work
A market segment is a group of people who share similar qualities. 
Active Trading
Market Efficiency Basics
Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time. 
Mutual Funds & ETFs
The ABCs of Mutual Fund Classes
There are three main mutual fund classes, and each charges fees in a different way. 
Investing Basics
5 Common Mistakes Young Investors Make
Missteps are common whenever you’re learning something new. But in investing, missteps can have serious financial consequences. 
Fundamental Analysis
5 Basic Financial Ratios And What They Reveal
Understanding financial ratios can help investors pick strong stocks and build wealth. Here are five to know. 
Mutual Funds & ETFs
The 4 Best American Funds for Growth Investors in 2016
Discover four excellent growth funds from American Funds, one of the country's premier mutual fund families with a history of consistent returns.

What is finance?
"Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >> 
What is the difference between positive and normative economics?
Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Full Answer >> 
What's the difference between a stop and a limit order?
Different types of orders allow you to be more specific about how you'd like your broker to fulfill your trades. When you ... Read Full Answer >> 
Are secured personal loans better than unsecured loans?
Secured loans are better for the borrower than unsecured loans because the loan terms are more agreeable. Often, the interest ... Read Full Answer >> 
Which mutual funds made money in 2008?
Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >> 
Does mutual fund manager tenure matter?
Mutual fund investors have numerous items to consider when selecting a fund, including investment style, sector focus, operating ... Read Full Answer >>