International Journal of Financial Management

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Testing the Relationship Between Liquidity and Stock Returns in the Palestinian Banks Listed in the Palestine Exchange


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1 Al-Quds Open University, Palestinian Territory, Occupied
     

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This study examines the relationship between liquidity and stock returns in the Palestinian banks listed in the Palestine Exchange over the period July 2009–July 2018. The study uses three liquidity measures: trading probability (TP), turnover rate (TR), and the measure of Amihud (2002), ILLIQ. The results of Pearson’s correlation test showed a positive correlation between tow liquidity measures (TP and ILLIQ) and stock returns, and the results of fixed-effect model showed a significant effect for the same tow liquidity measures (TP and ILLIQ) on stock returns. So, in the context of Palestine, TP and ILLIQ seem to appear better measures for liquidity; thus, the investors can use these two measures of liquidity to predict the stock returns of the Palestinian banks.

Keywords

Liquidity, Returns, Trading Probability (TP), Turnover Rate (TR), ILLIQ.
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  • Testing the Relationship Between Liquidity and Stock Returns in the Palestinian Banks Listed in the Palestine Exchange

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Authors

Marwan Jumah Darwish
Al-Quds Open University, Palestinian Territory, Occupied

Abstract


This study examines the relationship between liquidity and stock returns in the Palestinian banks listed in the Palestine Exchange over the period July 2009–July 2018. The study uses three liquidity measures: trading probability (TP), turnover rate (TR), and the measure of Amihud (2002), ILLIQ. The results of Pearson’s correlation test showed a positive correlation between tow liquidity measures (TP and ILLIQ) and stock returns, and the results of fixed-effect model showed a significant effect for the same tow liquidity measures (TP and ILLIQ) on stock returns. So, in the context of Palestine, TP and ILLIQ seem to appear better measures for liquidity; thus, the investors can use these two measures of liquidity to predict the stock returns of the Palestinian banks.

Keywords


Liquidity, Returns, Trading Probability (TP), Turnover Rate (TR), ILLIQ.

References