The Impact of Firm Size and Financial Leverage on ThePerformance of The Optimal Investment PortfolioAn Applied Study in the Iraq Stock Exchange for the Period (2024-2014)

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The Impact of Firm Size and Financial Leverage on ThePerformance of The Optimal Investment PortfolioAn Applied Study in the Iraq Stock Exchange for the Period (2024-2014)

Thesis Submitted

To The Council of The College of Administration and Economics, Kerbala
University, In Fulfillment of The Requirements for Master’s Degree In

Finance and Banking

By

Atheer Hadi Obaid Al-Sagri

Supervision By
Assistant professor Doctor
Mohammed Faez Hasan Al-Zauba’ay

This study aims to measure the impact of firm-specific structural characteristics—
specifically, firm size and leverage—on the performance of optimal investment portfolios
in the Iraq Stock Exchange. The study used the Markowitz (1952) mean-variance
optimization model to construct optimal investment portfolios. To achieve the study’s
objective, the surveyed companies were divided into groups based on their size (large and
small) and their level of leverage (high and low). The performance of the investment
portfolio was then evaluated using four established performance indicators: the Sharpe
ratio, Treynor ratio, Jensen’s alpha, and the information ratio, with a comparative
analysis conducted with the sample portfolio as a reference portfolio
The empirical analysis was based on a purposive sample of 33 companies selected from
among the 82 companies listed on the Iraq Stock Exchange during the study period. These
companies were selected according to two main criteria: the company’s continued trading
activity throughout the study period (2014-2024); and the availability of complete
financial data for the same period
To achieve the study’s objective and test its hypotheses, a set of financial and statistical
methods were employed, in addition to the Generalized Estimating Equations (GEE)
model. Based on this, the study reached several conclusions, the most important of which
was that large-market capitalization and low-leverage equity portfolios consistently
outperformed other portfolio groups in most portfolio performance indicators. The study
concluded with several recommendations, most notably the need to integrate company
size and leverage as key determinants in portfolio construction.
Keywords: Company size, leverage, Markowitz model, portfolio performance, optimal
investment portfolio, GEE model.