This thesis tests macroeconomic factor models in the Korean stock market over the full period of January 1998 to September 2008 with the Chen, Roll and Ross (1986) approach. The macroeconomic variables that I use in this study are; industrial production, inflation, risk premium, term structure, oil prices and exchange rates. Empirical findings reveal that the unexpected inflation (UI) and changes in oil prices (OG) are the significant sources of risk in determining stock returns through the whole period of 2002 to 2008. Also, the unexpected changes in term structure (UTS) and changes in industrial production (MP) play a role as significant factors depending on sample period. Second, the KOSPI is the most pervasive factor on stock pricing. However, the CAPM cannot perfectly explain cross-sectional differences in stock movements in the Korean stock market since the pricing ability of UI is not affected when the KOSPI is added into the model.