Value-at-risk (VaR) has been extensively used to measure systematic risk exposure in developed markets, e.g., of the US, Europe and Asia. This paper analyzes the accuracy of VaR measure for Pakistan's emerging stock market using daily data of the Karachi Stock Exchange-100 index for the period from January 1992 to June 2008. The paper computes VaR by employing data on annual basis as well as for the entire 17-year period. Overall, it is observed that VaR measures are more accurate when KSE index return volatility is estimated by GARCH(1, 1) model, especially at 95% confidence level. In this case, the actual loss of KSE-100 index exceeds VaR in only three years, 1998, 2006 and 2008. On average, for the whole period 95% VaR is estimated to be about 2.5% of the value of KSE-100 index. That is, on average, in one out of 20 days, KSE-100 index loses at least 2.5% of its value. The paper also investigates the asset pricing implication of downside risk measured by VaR and expected returns for decile portfolios sorted according to VaR of each stock. It shows that portfolios with higher VaR have higher average returns. Therefore, VaR as a measure of downside risk is associated with higher returns