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.
INVESTOPEDIA EXPLAINS '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!

Asset Management
1. The management of a client's investments by a financial services ... 
Expected Return
The amount one would anticipate receiving on an investment that ... 
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 ... 
Modern Portfolio Theory  MPT
A theory on how riskaverse investors can construct portfolios ... 
Risk
The chance that an investment's actual return will be different ...

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. 
Professionals
Why Investors Need to Rebalance Their Portfolios
The best way to explain why one should rebalance their portfolio is to show what could go wrong if one doesn't. 
Trading Strategies
5 Ways To Adapt To Tough Markets
Tough markets undermine profitability and lower selfconfidence. Fight back with five simple but powerful rules of engagement. 
Fundamental Analysis
What are the most common issues with Serial Correlation in stocks?
Read about the concept of serial correlation in stock returns, and learn why market analysts are divided about the efficacy of trading based on stock patterns. 
Trading Strategies
Under what circumstances is short selling advisable?
Find out when short selling a stock is profitable and what an investor should keep in mind before deciding to pursue a short sale investment strategy. 
Bonds & Fixed Income
How do I calculate yield to maturity of a zero coupon bond?
Find out how to calculate the yield to maturity for a zero coupon bond, and see why this calculation is more simple than a bond with a coupon. 
Fundamental Analysis
What does the term 'invisible hand' refer to in the economy?
Discover and understand the concept of the "invisible hand" as explained by Adam Smith, considered the founder of modern economic theory. 
Fundamental Analysis
At what level is the current account deficit considered excessive, in terms of percent?
Take a deeper look at the variables that impact current account deficits, and learn why not all types of deficits have equal impacts on a nation's economy.