Using Diversification to Construct an Optimal Investment Portfolio for Companies Listed on the Iraq Stock Exchange

Abstract

This study aims to identify the use of diversification and its impact on constructing the optimal investment portfolio in a sample of companies listed on the Iraqi Stock Exchange. Portfolio indicators and the optimal portfolio were analyzed, and a structural model of the relationships was constructed. This was done using modern methods for measuring returns and risks and employing quantitative models in portfolio construction. The study relied on financial data extracted from financial market reports. The rate of return, risk, standard deviation, and correlation coefficient between stocks were calculated to determine the optimal combination. The study reached conclusions, most notably the need to encourage investors to adopt scientific methods in building investment portfolios, in addition to enhancing transparency and financial disclosure for listed companies, which would increase the efficiency of the financial market.