This study aims to investigate the effect of macroeconomic factors on Palestine and Amman Stock Exchange returns. Also, the study handles the political events in the area and their impact on Palestine and Amman stock markets returns. This study applied the macro-econometric model based on Arbitrage Pricing Theory. In addition, the most important political events are selected, and their effect was tested using the event study methodology. The results show that the consumer price index, gross domestic product, and exchange rate have a significant impact on stock index returns, but industrial production index and balance of trade have no significant effect. In addition, the results reveal that the political events have a significant effect on Palestine and Amman stock markets returns. For instance, at Palestine Stock Exchange, seven out of eleven events had a significant impact on the Palestinian general index returns. Regarding the Amman Stock Exchange, there were nine out of eleven events, which had a significant impact on the Jordanian general index returns. The main results show that the macroeconomic factors and political events have a significant impact on the Palestine and Amman stock market returns. Both Palestine and Amman Stock Markets are inefficient and the markets do not absorb uncertain information and noisy events.