Dividend Growth, Cash Flow, and Discount Rate News

Dividend Growth, Cash Flow and Discount Rate News

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 t...

Dividend Policy and Cash Flow Uncertainty

Cash-flow Risk, Discount Risk, and the Value Premium∗

We propose a general equilibrium model with multiple assets able to match both the time series and the cross-sectional predictability of stock returns. The cross section of average returns is determined by both cash-flow risk and discount risk. We show that if cross-sectional differences in average returns are mainly determined by discount risk, then a counterfactual prediction obtains: Assets ...

Developing revised Fama-French Five-Factor models by including dividend rate, cash holdings, and Free cash flow to equity: evidence of Tehran stock exchange

Prediction of stock returns has always been one of the most important issues in finance. Investors have attracted to use of Fama-French Five-Factor Model (FFFFM) as one of the powerful methods for pricing financial assets and predicting the stock returns. This research investigates the predictability of stock returns by including some important firms features namely cash holdings, dividend rate...

Dividend Smoothing and Predictability

The relative predictability of returns and dividends is a central issue because it forms the paradigm to interpret asset price variation. A little studied question is how dividend smoothing, as a choice of corporate policy, affects predictability. We show that even if dividends are supposed to be predictable without smoothing, dividend smoothing can bury this predictability. Because aggregate d...