Abstract
The unique characteristics of the firms have some power to predict the expected returns. This study was conducted with an attempt to bridge the gap in the literature by offering empirical evidence about firm’s characteristics and their effect to stock returns. The secondary data of 307 Non-financial companies listed in Karachi Stock Exchange (KSE) were collected from the B-Recorder and Basic Balance Sheet Analysis (BBA) issued by the State Bank Of Pakistan for the period from 2000 to 2012. Market Capitalization (MC), sales Growth (SG), Earnings per Share (EPS) and Book to Market value (BMV) were taken as independent variables while Stock Market Returns as dependent variable. First two independent variables were used as proxies for size effect while later as value effect. Economic techniques like Correlation Matrix, Multiple regression analysis, Unit root test and Granger Causality were applied for empirical testing of the data. Results revealed that MC, EPS and BTM value had significant impact while sales growth had no effect on stock market returns.