This paper refers the discussion of risk premium with the predictors in evidence of gulf states. In this we analysis the sample 05 gulf states; Kuwait, Bahrain, Iraq, Oman and Qatar have been considered from the year 2001 to 2010. A conceptual model has been developed for the understanding the whole study and key findings have been explained for the future decisions. We use the different model to analysis that deposit interest rate has no significant effect on outcome and real interest rate have a significant effect on the outcome due to it is country specific factors and this result is derived by random effect model. Entities individual effect has been controlled through Fixed effect model.