This study examines the impact of firm specific variables on the market, interest rate and exchange rate risk. This is achieved in two folds. In the first step, the sensitivities of the returns to market, Interest rate and Exchange rate changes are estimated. In the following step, relationship between these sensitivities and firm specific variables is examined. The study employs, based on market capitalization, a sample of 104 non-financial firms listed on Pakistan Stock Exchange. In the first step, Simple Linear Regression Model is used to estimate the sensitivities (β) of the firms. In the second step, the study incorporates Generalized Method of Moments (GMM) model to estimate a relationship between the sensitivities and firm specific variables. The study finds that the return of a firm is sensitive only to the market rate changes, and neither interest rate nor exchange rate changes have any impact on the return of a firm. The study also finds that firm size, financial leverage, growth of the firm, earnings variability and accounting beta have a significant impact on the market beta. Supervisor:- Dr. Arshad Hassan