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!

Modern Portfolio Theory  MPT
A theory on how riskaverse investors can construct portfolios ... 
SafetyFirst Rule
Within the context of postmodern and modern portfolio theory, ... 
Homogeneous Expectations
An assumption in Markowitz Portfolio Theory that all investors ... 
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 ... 
Portfolio Variance
The measurement of how the actual returns of a group of securities ...

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. 
Trading
Modern Portfolio Theory vs. Behavioral Finance
Modern portfolio theory and behavioral finance represent differing schools of thought that attempt to explain investor behavior. Perhaps the easiest way to think about their arguments and positions ... 
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. 
Investing
Find The Highest Returns With The Sharpe Ratio
Learn how to follow the efficient frontier to increase your chances of successful investing. 
Managing Wealth
Calculating Portfolio Variance
Portfolio variance is a measure of a portfolioâ€™s volatility, and is a function of two variables. 
Managing Wealth
Explaining The Efficient Frontier
Most investment choices involve a tradeoff between risk and reward. The "Efficient Frontier" is a modern portfolio theory tool that shows investors the best possible return they can expect from ... 
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.

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 >> 
Can a mean variance analysis be done for any investment?
Learn how mean variance analysis is used in modern portfolio theory to create an optimal mix of assets to maximize return ... Read Answer >> 
What types of assets lower portfolio variance?
Learn what type of assets reduce portfolio variance and how modern portfolio theory uses correlation coefficients. Read Answer >> 
How is portfolio variance reduced in Modern Portfolio Theory?
Learn about modern portfolio theory, specifically what it asserts about asset allocation and managing portfolio risk through ... Read Answer >> 
What is the difference between the expected return and the standard deviation of ...
Learn about the expected return and standard deviation and the difference between the expected return and standard deviation ... 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 >>