Analysis of the Relationship between Portfolio Diversification and Stock Market Volatility in Iraq

Abstract

The current research aims to analyze the relationship between portfolio diversification and stock market volatility in Iraq, given the high level of risk and instability in the Iraqi market. The research was applied to a sample of companies listed on the stock exchange within the regular market using annual reports. The research used the covariance matrix to identify the standard weights of diversification for the portfolio and the optimal portfolio. The data were analyzed and the hypotheses were tested using financial and statistical tools. The research reached a set of conclusions, the most important of which is that portfolio diversification contributes effectively to confronting market volatility and is reflected positively in reducing risks and increasing returns.