The Impact of Inflation-Adjusted Accounting Numbers versus Traditional Numbers in Explaining Stock Prices: Evidence from the Palestine Exchange رسالة ماجستير

Abstract

This study aims to evaluate the extent to which inflation-adjusted accounting numbers provide a more accurate explanation of stock prices compared to traditional historical cost-based numbers in the Palestine Exchange (PEX). The importance of this study arises from the impact of inflation on the reliability of financial reporting, as traditional accounting methods often lead to distortions in asset valuation and profit measurement, thereby affecting investors’ decisions and overall market efficiency. The study was conducted in Palestine during the period from February 2025 to February 2026. A quantitative research methodology was adopted, relying on financial data collected from companies listed on the Palestine Exchange. The study population included all listed companies, while the sample consisted of firms with consistent and available financial data. Secondary data were obtained from financial reports, and statistical analysis tools were applied, particularly regression and correlation analysis using the R programming language, to examine relationships between variables and assess their explanatory power. The findings indicate that inflation-adjusted accounting numbers have a higher explanatory power for stock prices compared to traditional accounting numbers. The use of adjusted figures reduces distortions caused by inflation and provides a more accurate representation of firms’ financial performance. Additionally, IV. the results show that adopting inflation-adjusted accounting enhances the reliability of financial information, improves investor decision-making, and contributes to greater transparency in the Palestinian financial market. The study recommends adopting inflation-adjusted accounting practices in Palestine and developing regulatory frameworks aligned with international standards. It also highlights the need to increase awareness among companies and investors regarding the importance of such practices in improving financial reporting quality and supporting market stability