Post Modern Portfolio Theory 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. It is an extension of the traditional modern portfolio theory “MPT”, which is an application of mean-variance analysis or “MVA”. The differences between risk, as defined by the standard deviation of returns, between the post-modern portfolio theory and modern portfolio theory is the key factor in portfolio construction. It was created in 1991 by software entrepreneurs Brian M. Rom and Kathleen Ferguson.
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