Abstract
This paper aims at examining the probable equilibrium and dynamic relations between Palestine StockExchange (PEX) and Amman Stock Exchange (ASE). Within the framework of international trade theories, thisstudy employs Engle-Granger Cointegration procedure (1987) as an estimation model involving monthly timeseries data from 1997 through 2011. The empirical results show that there is a significant equilibriumrelationship between PEX and ASE, but fail to establish empirical evidence on dynamic relations between thetwo stock markets using Granger Causality tests. However, analysis of dynamic interactions during thepost-sample period via Impulse-Response Functions and Variance Decomposition suggest that changes in ASEindex do influence the performance of PEX.
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