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This study aims to find the relationship of stock market returns and selected financial market variables (market capitalization, earnings per share, price-earnings multiples, dividend yield and trading volume) of Malaysia grounded by the arbitrage pricing theories.

This study empirically examines the effects of selected financial market variables on stock market returns using 64 companies listed in Malaysia's stock market with data spanning from 2005 to 2018. A systematic empirical study based on the Generalized Method of Moments following Arellano and Bond (1991) has been taken to estimate the effect.

The regression result of the financial market variables and stock market return shows that, except for trading volume, all selected financial market variables play significant roles in the stock market returns. Furthermore, market capitalization, earnings per share, price-earnings ratio, dividend yield and trading volume have a positive impact on stock market returns.

The outcome of this study can contribute by helping domestic and global investors devise strategies to minimize their risks. Also, policy administrators can use the outcomes of this study to inform the micro- and macro-level policy formulation.

This study will contribute to filling the gap in knowledge concerning the new release of factors affecting the stock market returns of Malaysia.