Evaluating Investment Portfolio Performance Using the Mar and Mad Models Within the Return and Risk Framework: An Analytical Study in the Iraq Stock Exchange

This study aimed to evaluate investment performance using Mean Absolute Deviation (MAD) and the MAR Ratio (Return-to-Maximum Drawdown), balancing return and risk, while demonstrating how performance assessment results and investment weightings vary depending on the model employed. The study addressed the core issue of determining the most suitable model for evaluating investment performance in the Iraq Stock Exchange (ISX) and analyzing how different analytical approaches affect the accuracy of investment assessments. To achieve its objectives, the study adopted a descriptive-analytical approach based on historical financial data from a sample of 39 companies across five sectors—Banking, Insurance, Industry, Hotels, and Services—covering the period from 2014 to 2025. Various financial and statistical metrics were utilized, including Mean Absolute Deviation (MAD), Compound Annual Growth Rate (CAGR), Maximum Drawdown (MDD), and the MAR Ratio, alongside the Capital Asset Pricing Model (CAPM) and the Treynor Index, using the Iraq Stock Exchange Index (ISX60) as a benchmark for comparison. The study found significant variations in returns and risk profiles across the sectors, with the industrial sector achieving the highest average return (15.21%). The MAR portfolio demonstrated economic superiority, achieving an average annual return of 11.18%—with an annualized component of 9.59%—and a MAR ratio of 0.377, compared to 0.270 for the MAD portfolio. Maximum drawdown stood at 25.40% for the MAR portfolio and 26.90% for the MAD portfolio, versus 68.16% for the benchmark market index. A statistical difference in drawdown performance was observed for both portfolios relative to the market, although no significant direct differences were found regarding returns or maximum drawdown. The study concluded that fundamental differences necessitate the use of multiple metrics to determine overall investment effectiveness, as these metrics complement one another in identifying optimal investment performance. It recommended employing diverse risk-based investment criteria, diversification indicators, and modern approaches to constructing investment portfolios—thereby enhancing investment precision and management effectiveness within the Iraq Stock Exchange.