The optimal performance of the international risky portfolio in the shadow of the financial crisis, an analytical study of a sample of international stock markets

Ass.Pro.Dr. Maitham Rabie Hadi

THE IRAQI MAGAZINJE FOR MANAGERIAL SCIENCES
2018, Volume 14, Issue 57, Pages 29-66

Abstract

The economic globalization has positive and negative effects. The positive lies in the broad base of investment opportunities available to the local investor. The negativity comes from the fact that international markets are becoming more integrated, and this may reduce the feasibility of performing diversified portfolios internationally. The intellectual debate lies in the fundamental question of whether the performance of the international portfolios was affected by the financial crisis compared to what before and after. In fact, this cognitive problem has been and continues to be a very important debate at both the academic and practical levels. The study seeks to build the optimal international portfolio and to show how it is structured and different from the optimal local portfolio, and to determine the extent to which its performance was affected during the financial crisis as compared to what preceded it and beyond. And disclosure of whether the international diversification of the investment portfolio of dangerous best in the era of globalization is a useful tool that allows to build an optimal investment portfolio provides the best trade-off between risk and return. The study conducted a detailed analysis of the performance of the international optimal risk portfolio in the light of the financial crisis in the light of the data obtained for the sample of the study of indicators of the Iraqi and international stock markets. The latter was selected according to the FTSE rating for a sample of 53 international stock market indices, The Iraqi market for securities was included in the sample because the study is concerned with evaluating the performance of the diversified portfolio internationally from the perspective of the local Iraqi investor. The study period included (771) trading days for the sample studied as a whole, and started on (13/9/2006) until (26/05/2011). For the purpose of knowing the feasibility of the international diversification performance during the crisis compared to the previous period, the sampling period was divided into three periods, in equal terms, and for each period (257) days. Using many financial and statistical methods, the study reached a number of conclusions, the most important of which are:The performance of the international optimum risk portfolio is different during the financial crisis than before and after. Analytical results showed that the optimal international portfolio was superior to the local portfolio and to all periods. In addition, the performance of the international portfolio of variance resulted in analytical results on the improvement of the performance of the portfolio during the crisis after compared to its counterparts in the two periods during the pre-crisis, which confirms that the performance of the international portfolio of optimal risk changed by the impact of the crisis and before and after.The study came out with a number of recommendations, perhaps the most important of which is: The Iraqi investor should move from the local environment to the international environment for financial investment, resulting in a greater benefit reflected by a more efficient exchange between risk and return. As the markets are heavily affected by the crisis at the beginning, but the markets soon absorb the crisis and absorb its effects and return to rebound and recover. As the results showed in the performance of the international portfolio after the crisis was much better than in the crisis and even before.