摘要：This paper examines the relationship between economic, non-economic factors and equity premium in Pakistan stock
market using annual data of 306 non-financial firms. Equity premium is considered as one of the most important
factors in finance literature. Information of the equity premium is a significant statistic for the resourceful distribution
and valuation of capital resources. We explored firm level equity premium and its multi level determinants in the
context of Pakistan stock market. We have considered a set of economic (micro and macro variables) and noneconomic
factors including terrorism and political instability as determinants of firm level equity premium. During the
selected sample period the average market premium of Pakistan Stock Exchange (PSX) KSE100 Index was 20
percent. However, the average firm-level equity premium of individual firms was 8 percent. The estimated result
shows that there is a significant impact of company fundamentals and macroeconomic factors on firm level equity
premium. Additionally, terrorism, political instability, government regime change and financial crises also severely
affect the firm level equity premium. Overall company fundamental (micro level factors) have more effect on EP
followed by Non- Economics and Macroeconomic variables.
