Does cash flow predict returns?

Narayan,PK and Westerlund,J 2014, Does cash flow predict returns?, International review of financial analysis, vol. 35, pp. 230-236, doi: 10.1016/j.irfa.2014.10.001.

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Title Does cash flow predict returns?
Author(s) Narayan,PKORCID iD for Narayan,PK orcid.org/0000-0001-7934-8146
Westerlund,JORCID iD for Westerlund,J orcid.org/0000-0002-8030-5706
Journal name International review of financial analysis
Volume number 35
Start page 230
End page 236
Publisher Elsevier BV
Place of publication Amsterdam, Netherlands
Publication date 2014-10-01
ISSN 1057-5219
1873-8079
Keyword(s) Cash flow volatility
Panel data
Predictability
Returns
Sectors
Social Sciences
Business, Finance
Business & Economics
STOCK RETURNS
EQUITY RETURNS
ECONOMIC VALUE
CROSS-SECTION
RISK
VOLATILITY
INVESTMENT
MARKETS
MODELS
PRICE
Summary In this paper, we propose the hypothesis that cash flow and cash flow volatility predict returns. We categorize firms listed on the New York Stock Exchange into sectors, and apply tests for both in-sample and out-of-sample predictability. While we find strong evidence that cash flow volatility predicts returns for all sectors, the evidence obtained when using cash flow as a predictor is relatively weak. Estimated profits and utility gains also suggest that it is cash flow volatility that is more relevant as a source of information than cash flow.
Language eng
DOI 10.1016/j.irfa.2014.10.001
Field of Research 150202 Financial Econometrics
Socio Economic Objective 900102 Investment Services (excl. Superannuation)
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2014, Elsevier BV
Persistent URL http://hdl.handle.net/10536/DRO/DU:30068344

Document type: Journal Article
Collections: Faculty of Business and Law
School of Accounting, Economics and Finance
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