Constructing Volatility-Managed Portfolios Using Downside Risk: A Comparative Study Between Growth and Value Portfolios — An Analytical Study of a Sample of Companies Listed on the Iraq Stock Exchange for the Period (2015–2017)

Abstract

The study aimed to construct and evaluate volatility-managed investment portfolios using downside risk, and to compare growth and value portfolios. This was achieved by adopting a more accurate and objective risk measure—downside risk—that reflects the minimum level of risk investors seek to avoid. The study population consisted of all companies listed on the Iraq Stock Exchange across various economic sectors, while the study sample included 35 companies over the period from 2015 to 2017.A set of financial and statistical measures were employed to achieve the objectives of the study. The findings revealed several key conclusions, most notably: the effectiveness of volatility-managed portfolios in reducing total risk exposure by lowering allocation to highly volatile assets during periods of heightened market uncertainty, and the clear outperformance of value portfolios over growth portfolios. The study concluded with several recommendations, the most important of which was: investors seeking protection against downside losses should adopt volatility-managed portfolio models that offer high efficiency in measuring downside risk, as they demonstrated superior performance compared to traditional investment portfolios.