Dividend Growth, Cash Flow and Discount Rate News
Manchester Business School
Norwegian Business School
October 31, 2011
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
Using a new variable based on a model of dividend smoothing, we find dividend growth is highly predictable and cash flow news contributes importantly to return variability. Cash flow betas derived from this predictability are central to explaining the size effect in the cross section of returns. However, they do not explain the value effect; this is explained by noise betas. We also find that the relative importance of cash flow news in explaining recent stock price run-ups and subsequent falls increases when cash flow news is estimated directly.
Number of Pages in PDF File: 45
Keywords: dividend growth, predictability, cash flow news, discount rate news
JEL Classification: G1Accepted Paper Series
Date posted: November 1, 2011
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 0.437 seconds