Post-Modern Portfolio Theory Introduction - （后现代投资组合理论介绍,）.pdf

Post-Modern Portfolio Theory Introduction Modern portfolio theory (MPT) and its mean-variance optimization (MVO) model for asset allocation are Nobel Prize-winning theories of global equilibrium, but are unreliable for the primary task to which the financial services industry applies them-building portfolios. Post-modern portfolio theory (PMPT) presents a new method of asset allocation that optimizes a portfolio based on returns versus downside risk (downside risk optimization, or DRO) instead of MVO. The core innovation of PMPT is its recognition that standard deviation is a poor proxy for how humans experience risk. Risk is an emotional condition-fear of a bad outcome such as fear of loss, fear of underperformance, or fear of failing to achieve a financial goal. Risk is thus more complex than simple variance but can nonetheless be modeled and described mathematically. PMPT points the way to an improved science of investing that incorporates not only DRO but also behavioral finance and any other innovation that leads to better outcomes. History In 1959, Harry Markowitz, the father of modern portfolio theory, published Portfolio Selection, in which he proposed that investors expect to be compensated for taking additional risk, and that an infinite number of efficient portfolios exist along a curve defined by three variables: standard deviation, correlation coefficient, and return. The efficient-frontier curve consists of portfolios with the maximum return for a given level of risk or the minimum risk for a given level of return. The algorithm used to generate the curve is known as mean variance optimization (MVO), since what is being optimized is return versus standard deviation, or variance from the mean return. The wor