This study examines the impact of macro-economic volatilityon stock return volatility for fifty stocks listed at the Karachi StockExchange using monthly data from July 1998 to June 2014. Themacro-economic variables included in the analysis are market return,industrial production, inter-bank call money rate, term structure ofinterest rate, money supply, exchange rate and the inflation rate. Theresult of significant autoregressive process suggests existence ofvolatility persistence. The industrial production has a negative effecton stock market volatility and the volatility of exchange rate capturesthe external sector volatility and has a positive effect on stock returnvolatility. The increased variation in money supply and inflationmake stock returns more volatile and an unexpected change in callmoney rate and the term structure of interest rate has the oppositeeffect on stock returns volatility. This leads to the conclusion thatstock prices fluctuations in Pakistan are influenced by financial andeconomic variables’ uncertainty. Therefore, investors, authorities andpolicy makers are needed to take into account th
