Testingability of Walter and certainty Equivalent Models inidentifying the real stocks prices in Palestine Exchange

Abstract

The research aims to identify the explanatory ability of the Walter and Certainty Equivalent Models in determining stock prices, and to better clarify the best and most convenient Model to Palestine Exchange. The study sampleincluded (28) companies and the Financial method was used to determine stocks of companies that pricedless and more than it should be. Further, Statistic smethod was alsoused to identify the explan atoryability tha twas calculate dthrough Simple correlation coefficient of both Models. The most important findings of the study were tha tboth Models were scientificallyunable to determine stock prices as some of the predicted values were negative, which is unrealistic from the scientific and practical point of view. Furthermore, it was clear that Walter and Certainty Equivalent Models were invalid to bepredicted statistically due to the weakness of the explanatory ability of both Models. It recommends to introduce an accounting Model based on accounting information directly to determine the stock prices in the Palestinian environment. It also highly recommends  the necessity of testing the validity of the two models by applying them in exchanges and financial markets in other various environments.