L'efficacité de la sécurité palestinienne

This paper examines the efficiency of the Palestine Security Exchange (PSE) at the

weak-level for 35 stocks listed in the market by using daily observations of the PSE

indices: Alquds index, general index, and sector indices. Parametric and nonparametric

tests for examining the randomness of the PSE stock prices were utilized. The parametric

tests include serialcorrelation test, and Augmented Dickey-Fuller (ADF) unit root tests. The

nonparametric tests include runs test, and Phillips-Peron (PP) unit root test. The study

utilized nonparametric tests for investigating the efficiency of the PSE at the weak level,

especially, the results of Jarque-Bera test for normality showed that the daily returns of the

PSE are not normally distributed. The serial correlation tests and the runs tests both

revealed that the daily returns are inefficient at the weak-form. Also, the unit root tests

(Augmented Dickey-Fuller (ADF) unit root test and Phillips-Peron (PP) unit root test)

suggest the weak-form inefficiency in the return series. However, the PSE is inefficient at

the weak level; as a result, this is likely to be an evidence that the prudent investor who

deals with the PSE will achieve abnormal returns using historical data of stock prices, and

trading volume.

1. Introduction

In Palestine, the Palestine Securities Exchange (PSE) market was established since 1997. Empirical

studies that based on the trading data of the PSE market are very rare or non-existent in Palestine.

After one decade of trading, there is a potential to put into practice an empirical examination

from Palestine regarding the behaviors and dynamics of stocks prices. One of the critical issues in

Palestine is the efficiency of PSE, so that the process of indicating the efficiency is an essential element

for serving the investors and policymakers. Therefore, central to Palestinian investors and

International Research Journal of Finance and Economics - Issue 32 (2009) 8

policymakers are dealing with Palestinian emerging equity market to knowledge the existence and

availability of efficiency at the weak level, that is, to deal with incorporated information in a correct

manner and more efficiently. Also, stock market efficiency is an important concept for understanding

the working of the capital market.

Samuelson (1965) and Fama (1970) indicates that the Efficient Market Hypothesis (EMH)

supposes that share price adjust rapidly to the appearance

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