Stock Returns and Cash Flows: A New Asset Pricing Approach

34 Pages Posted: 24 Nov 2020

See all articles by Sonia Di Tomaso

Sonia Di Tomaso

University of Pavia

Dennis Marco Montagna

University of Pavia - Department of Economics and Management

Antonio Amendola

affiliation not provided to SSRN; AcomeA SGR

Date Written: October 11, 2020

Abstract

On this purpose, this work is focused on a non-conventional profitability measure, at least in terms of assets pricing models, where dividends or profits are widely used. The attention is focused on a proxy measure of Operating Cash Flows: the “Ebitda after Capex”. The relationship returns – cash flows’ volatility has been examined through an empirical analysis conducted on the stocks of the S&P500 Index combining the main quantitative and statistical approach with a qualitative overview respect the macroeconomic background. Starting from a correlation rolling window approach, three different regressions techniques have been implemented; the simple Ordinary Least Squares regressions (OLS), the linear Quantile (LQR) regression and the Multiple regression model (MLR), all performed at different levels in terms of stocks (QoQ and YoY) and sectors (MoM, QoQ, YoY).

The cross-sectional and time-series results support the effects of cash flow’ volatility on the stocks’ performance and highlighted its sensitivity respect not only the different short-term and long-term horizons, but also in terms of sector’ exposure.

Keywords: Asset pricing, Volatility, Return, Quantile Regression, Stock pricing, Cash flow, Financial modelling, value investing, CAPM, Fama – French models

JEL Classification: G10, G11, C81

Suggested Citation

Di Tomaso, Sonia and Montagna, Dennis Marco and Amendola, Antonio and Amendola, Antonio, Stock Returns and Cash Flows: A New Asset Pricing Approach (October 11, 2020). Available at SSRN: https://ssrn.com/abstract=3709525 or http://dx.doi.org/10.2139/ssrn.3709525

Sonia Di Tomaso

University of Pavia ( email )

Corso Strada Nuova, 65
27100 Pavia, 27100
Italy

Dennis Marco Montagna (Contact Author)

University of Pavia - Department of Economics and Management ( email )

Corso Strada Nuova, 65
Pavia, +39 0382 984402 27100
Italy

Antonio Amendola

affiliation not provided to SSRN

AcomeA SGR ( email )

Largo Donegani
milano, 20121
Italy

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