Effect of Fundamental and Stock Market Variables on Equity Return in Pakistan

Abstract

The sole purpose of this study is to investigate the significant determents of equity return. Based on a sample of non-financial listed companies in Karachi Stock Exchange from 1998 to 2009, panel data models will be applied with different estimators to confirm the existence of market premium, size, book to market ratio, leverage, dividend, earning, cash flow, discretionary accrual and stock price volatility. CAPM plays considerable role to define equity return in Karachi stock exchange. Fama and French three factor model failed to predict the stock return in Pakistan. Market premium, size, discretionary accrual and volatility have significant positive effect in joint model while book to market confirms negative effect on stock return.