Serious investors interested in digging deeper into the issue of portfolio risk management will find the article titled, Post-Modern Portfolio Theory of great interest. Any link is bound to produce different references over time so here is a clue to finding the article. Google the term, “Post-Modern Portfolio Theory” and then look for the PDF article by the same name. The article is authored by Pete Swisher and Gregory W. Kasten. Download the PDF file and open.
Post-Modern Portfolio Theory is the study of moving a 60 year-old theory forward. One issue that needs transformation is portfolio risk management. Mean-variance or standard deviation is an inadequate method for measuring portfolio risk. I learned this many years ago when I first started using the Windows version of Captool. Later, I read in Harold Evensky’s book, Wealth Management, the advantage of using semi-variance instead of mean-variance to measure portfolio risk. Verbiage from many sources did not translate into actual measurement until a few months ago when I was able to convert these ideas into a workable Excel worksheet within the TLH portfolio monitoring spreadsheet. [Read more...]