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Post-modern portfolio theory supports diversification in an investment portfolioto measure investment’s performance

Devinaga Rasiah

Journal of Finance and Investment Analysis, 2012, vol. 1, issue 1, 3

Abstract: This study looks at the Post-Modern Portfolio Theory that maintains greater diversification in an investment portfolio by using the alpha and the beta coefficient to measure investment performance. Post-Modern Portfolio Theory appreciates that investment risk should be tied to each investor’s goals and the outcome of this goal did not symbolize economic of the financial risk. Post-Modern Portfolio Theory’s downside measure generated a noticeable distinction between downside and upside volatility. Brian M. Rom & Kathleen W. Ferguson, 1994, indicated that in post-Modern Portfolio Theory, only volatility below the investor’s target return incurred risk, all returns above this target produced ‘ambiguity’, which was nothing more than riskless chance for unexpected returns.

Date: 2012
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Handle: RePEc:spt:fininv:v:1:y:2012:i:1:f:1_1_3