The Value-Relevance of Price and Return Models: An Empirical Evidence from Palestine Exchange (PEX)

(Pages 1728-1734)

Samih Yousef*
Ph.D. Accounting and Finance Ph.D. program, Faculty of High Studies, Arab American University- Palestine (AAUP)


Explaining the association between earnings and stock returns has been a topic of international research for decades. Previous studies resulted in mixed results regarding the explanatory power of earnings-return models; many studies confirmed the significant earnings-return relationship, while some studies showed a weak association. This study is the first in Palestine to investigate alternative earnings-return specification models. The study used panel data of annual EPS and stock prices for the companies listed in the Palestine Exchange (PEX) over ten years from 2012 to 0202. Employing regression analysis, three models were examined: the price model, the return model, and the differenced-price model. The results of this study revealed that all three models are significant at a 1% level in explaining the earnings-return relationship. However, it was demonstrated that there are differences in the explanatory power between the models; the study showed that the price model has more explanatory power over the two other models since it provides a higher response coefficient, higher R-squared, and more consistency over the years of the study. The high explanatory ability of the price model could be attributed to the fact that stock price contains more information about future earnings. These conclusions are consistent with previous studies. (Kothari & Zimmerman, 1995; Dumontier & Labelle, 1998; Ahmed, 2018; Agrawal & Bansal, 2021).


Earnings, stock returns, price model, return model, differenced-price model.

How to Cite:

Samih Yousef. The Value-Relevance of Price and Return Models: An Empirical Evidence from Palestine Exchange (PEX). [ref]: vol.21.2023. available at:

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