Explaining returns with cash-flow proxies

• 成果类型: Article
• 署名作者: Hecht, P; Vuolteenaho, T
• 署名单位: Harvard University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhj001
• 发表日期: 2006
• 页码: 159
• 关键词: STOCK-RETURNS; earnings announcements; UNEXPECTED EARNINGS; Expected returns; REGRESSION-MODEL; Forecast errors; real activity; Bond markets; time-series; determinants

摘要

Stock returns are correlated with contemporaneous earnings growth, dividend growth, future real activity, and other cash-flow proxies. The correlation between cash-flow proxies and stock returns may arise from association of cash-flow proxies with one-period expected returns, cash-flow news, and/or expected-return news. We use Campbell's (1991) return decomposition to measure the relative importance of these three effects in regressions of returns on cash-flow proxies. In some of the popular specifications, variables that are motivated as proxies for cash-flow news also track a nontrivial proportion of one-period expected returns and expected-return news. As a result, the R-2 from a regression of returns on cash-flow proxies may overstate or understate the importance of cash-flow news as a source of return variance.