This study examines the causal relationship between return and trading volume in the Palestine Exchange. Using weekly trading volume and returns over the period from October 2000 to August 2010, the study employs GARCH (1,1) model to test the existence of the positive contemporaneous relationship. The study found that the relationship preserves after taking heteroskedasticity into account. Moreover, the results of Granger causality test show that there is bidirectional Granger causality between returns and trading volume, regardless of the measures of trading volume used.

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.