Building an effective investment portfolio and determining its weights according to the cut-off rate criterion an applied analytical study on banking sector shares on the Iraq stock exchange

The research is focused on the development of an effective investment portfolio of the stock of the banking sector at the Iraq Stock Exchange and the identification of the weight of these stocks in accordance with the cut-off rate criterion. The analysis deals with the fundamental hypothesis, which presupposes that this criterion can play a role in establishing a balance between a return and risk, and thereby, help creating an efficient portfolio. The study was based on market data analysis and investment strategy whereby the corresponding outcomes of efficient portfolio will be compared to that of benchmark market portfolio by use of buy-and-hold strategy. The findings demonstrated that the efficient portfolio did not give better results than the market portfolio in terms of their returns, but it accomplished a dramatic decrease in risk whereby the standard deviation of risk went down to 0.003 as compared to 0.00434 of the market portfolio. Going by these findings, the initial sub-hypothesis was accepted which holds that application of the cut-off rate criterion results to lower risk than the market portfolio. The study also enabled an observation where the efficient portfolio had made better returns against its risk and this brings into play the acceptance of the second sub-hypothesis which goes by the name that the cut off rate criterion is superior to the market portfolio as far as acceptance is concerned. This paper helps in building enhanced scientific knowledge on the portfolio constructing methods in upcoming financial system and is helpful to many investors in Iraq stock exchange.