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Explaining Returns With Cash Flow Proxies
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Book Synopsis Explaining Returns with Cash-flow Proxies by : Peter Hecht
Download or read book Explaining Returns with Cash-flow Proxies written by Peter Hecht and published by . This book was released on 2003 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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. We use Campbell's (1991) return decomposition to measure the relative importance of these three effects in regressions of returns on cash-flow news also track a nontrivial proportion of one-period expected returns and expected-return news. As a result, the R2 from a regression of returns on cash-flow proxies may overstate or understate that importance of cash-flow news as a source of return variance.
Book Synopsis Explaining Returns with Cash-Flow Proxies by : Peter Andrew Hecht
Download or read book Explaining Returns with Cash-Flow Proxies written by Peter Andrew Hecht and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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 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.2.
Book Synopsis Expalining Returns with Cash-flow Proxies by : Peter Hecht
Download or read book Expalining Returns with Cash-flow Proxies written by Peter Hecht and published by . This book was released on 2005 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Free Cash Flow as a Reliable Proxy for Predicting Stock Returns by : Jake Cully
Download or read book Free Cash Flow as a Reliable Proxy for Predicting Stock Returns written by Jake Cully and published by . This book was released on 2017 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bad faith and corruption within financial reporting and inconsistent representation of corporate earnings questions the quality of earnings as an available means of measuring firm performance, and furthermore, predicting stock returns. Using direct method cash flows provides a clear picture of a firm's health and sustainability and enables an understanding of the economic reality of a firm's operations beyond the bottom line. This paper tests the explanatory power of free cash flows for the cross-section of stock returns alongside those of earnings. The extension of the Fama-French 3 Factor model with a “Clean” Free Cash Flow (CFCF) factor and a “Bottom-line” (BL) Earnings (Net income) factor reveals that both factors are significant in predicting annualized stock returns. Across a sample of various firm sizes, further data re-construction shows that free cash flows are an important measure in stock selection. This paper will contrast and reflect upon other empirical work supporting earnings or other methods for stock yield estimators.
Book Synopsis Accounting Trends and Techniques: U.S. GAAP Financial Statements--Best Practices in Presentation and Disclosure by : AICPA
Download or read book Accounting Trends and Techniques: U.S. GAAP Financial Statements--Best Practices in Presentation and Disclosure written by AICPA and published by John Wiley & Sons. This book was released on 2017-12-04 with total page 800 pages. Available in PDF, EPUB and Kindle. Book excerpt: Updated for new accounting and auditing guidance issued, this valuable tool provides hundreds of high quality disclosure examples from carefully selected U.S. companies of different sizes, across industries such as banking, credit and insurance, communication services, and healthcare from such organizations as Scotts Miracle-Gro, Coca-Cola, Caterpillar, and BB&T. Illustrations of the most important, immediate, and challenging disclosures, such as derivatives and hedging, consolidations, and fair value measurement are provided. Hot topics include statement of cash flows, going concern, and business combinations and intangibles. This edition also provides clear, direct guidance to help you understand and comply with all significant reporting requirements and detailed indexes to help you quickly find exactly what you need.
Book Synopsis Beyond Earnings by : David A. Holland
Download or read book Beyond Earnings written by David A. Holland and published by John Wiley & Sons. This book was released on 2017-12-11 with total page 421 pages. Available in PDF, EPUB and Kindle. Book excerpt: Beyond Earnings is targeted at investors, financial professionals, and students who want to improve their ability to analyze financial statements, forecast cash flows, and ultimately value a company. The authors demonstrate that reported earnings are easily gamed by accounting shenanigans and reveal how commonly used profitability measures such as return on equity can be misleading. Because earnings and P/E ratios are too unreliable for valuation, this book takes you beyond earnings and shows you how to apply the HOLT CFROI and Economic Profit framework in a step-by-step manner. A better measure of profitability results in improved capital allocation decisions and fundamental valuations. This ground-breaking book offers the first practical in-depth discussion of how profitability and growth fade, and shows how to put this information to work right away. The authors introduce their trailblazing Fundamental Pricing Model which includes fade as an adjustable value driver and can be used to value the impact of business model disruption. As the authors explain, the key to superior stock picking is understanding the expectations embedded in a stock’s price and having a clear view of whether the company can beat those expectations. The HOLT framework has been rigorously field tested for over 40 years by global investment professionals to help them make better stock picks and by corporate managers to understand the expectations embedded in their stock price. Beyond Earnings is an indispensable guide for investors who want to improve their odds of outperforming the competition.
Book Synopsis Cash Flow Duration and the Term Structure of Equity Returns by : Michael Weber
Download or read book Cash Flow Duration and the Term Structure of Equity Returns written by Michael Weber and published by . This book was released on 2018 with total page 79 pages. Available in PDF, EPUB and Kindle. Book excerpt: The term structure of equity returns is downward-sloping: stocks with high cash flow duration earn 1.10% per month lower returns than short-duration stocks in the cross section. I create a measure of cash flow duration at the firm level using balance sheet data to show this novel fact. Factor models can explain only 50% of the return differential, and the difference in returns is three times larger after periods of high investor sentiment. Analysts extrapolate from past earnings growth into the future and predict high returns for high-duration stocks following high-sentiment periods, contrary to ex-post realizations. I use institutional ownership as a proxy for short-sale constraints, and find the negative cross-sectional relationship between cash flow duration and returns is only contained within short-sale constrained stocks.
Book Synopsis The Role of 'Other Information' in Analysts' Forecasts in Understanding Stock Return Volatility by : Yaowen Shan
Download or read book The Role of 'Other Information' in Analysts' Forecasts in Understanding Stock Return Volatility written by Yaowen Shan and published by . This book was released on 2013 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study proposes and validates “other information” in analysts' forecasts as a legitimate proxy for future cash flows, and examines its incremental role in explaining stock return volatility. We suggest that “other information” contains information about fundamentals beyond that reflected in current financial statements, and reflects firms' fundamentals on a more timely basis than dividends or earnings. The link between “other information” and volatility can be derived from a combination of the accounting version of the Campbell-Shiller model (Campbell and Shiller 1988a, 1988b; Vuolteenaho 2002) and Ohlson's (1995) linear information dynamics. Using standardized regressions we find volatility increases when current “other information” is more uncertain, and increases more in response to unfavorable news compared to favorable news. Variance decomposition analysis shows that the variance contribution of “other information” dominates that of expected-return news. The incremental role of “other information” is at least half of the effect of earnings in explaining future volatility. The results are valid for measures of both systematic and idiosyncratic volatility, and are more pronounced for firms with poor information environments. Overall, our results highlight the importance of including “other information” as an additional cash-flow proxy in future studies of stock prices and volatility.
Book Synopsis Informative Content of Cash Flows in the Analysis of Risk by : Dante D. Terreno
Download or read book Informative Content of Cash Flows in the Analysis of Risk written by Dante D. Terreno and published by . This book was released on 2018 with total page 15 pages. Available in PDF, EPUB and Kindle. Book excerpt: The proposed of this paper is to determine the informative content of the cash flows related to the earnings of the process of explaining the firm's risk. The risk proxies used are Mark-to-Book, Market Beta, financial leverage and insolvency risk. The models are solved by the ordinary least square (OLS) using the panel data technique. The population of this study involves companies listed on the Buenos Aires Stock Exchange in the period from 2004 to 2012. The evidence for firms listed in the Buenos Aires Stock Exchange indicates that the Cash Flow Statement shows an additional informative content to the earnings. The operating, investing, and financing cash flows exhibit a differential effect for the different risk proxy; however, the investment cash flows predominate in the risk market.
Author :Patricia M. Dechow Publisher :Research Foundation of the Institute of Chartered Financial Analysts ISBN 13 :9780943205687 Total Pages :152 pages Book Rating :4.2/5 (56 download)
Book Synopsis Earnings Quality by : Patricia M. Dechow
Download or read book Earnings Quality written by Patricia M. Dechow and published by Research Foundation of the Institute of Chartered Financial Analysts. This book was released on 2004-01-01 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Fast and Frugal Finance by : William P. Forbes
Download or read book A Fast and Frugal Finance written by William P. Forbes and published by Academic Press. This book was released on 2019-06-15 with total page 276 pages. Available in PDF, EPUB and Kindle. Book excerpt: A Fast and Frugal Finance: Bridging Contemporary Behavioral Finance and Ecological Rationality adds psychological reality to classical financial reasoning. It shows how financial professionals can reach better and quicker decisions using the 'fast and frugal' framework for decision-making, adding dramatically to time and outcome efficiency, while also retaining accuracy. The book provides the reader with an adaptive toolbox of heuristic tools and classification systems to aid real-world decisions. Throughout, financial applications are presented alongside real-world examples to help readers solve established problems in finance, including stock buying and selling decisions, even in situations of considerable uncertainty and risk. The book concludes by describing potential solutions to financial problems, including discussions on high frequency trading and machine learning algorithms. Demonstrates how well-constructed 'fast and frugal' models can outperform standard models in time and outcome efficiency Focuses on how financial decisions are made in reality rather than how they should be made Discusses how cognition and the decision-making context interact in producing 'fast and frugal' choices Explores the development of decision-making trees in finance to aid in decision-making
Book Synopsis Disappearing Investment-Cash Flow Sensitivities by : Niclas Andrén
Download or read book Disappearing Investment-Cash Flow Sensitivities written by Niclas Andrén and published by . This book was released on 2017 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: According to a recent conjecture in the literature, earnings have become a poorer proxy for cash flow from operations over time. We find that since 1988, when cash flow statements started to be consistently reported in Compustat, the cash effectiveness of earnings has actually increased for a large sample of US manufacturing firms. This occurs despite the introduction of fair value accounting and increasing accounting accruals during the last three decades. The evidence suggests that this puzzle is explained by more efficient working capital management. Also contrary to the conjecture, using more comprehensive measures of cash flow does not restore the investment-cash flow sensitivity, which continues to be around 0.05 in more recent periods. We end by noting that the investment model used in the literature can be enhanced by including accruals, since it leads to a more precise estimation of cash flow.
Book Synopsis Valuation Approaches and Metrics by : Aswath Damodaran
Download or read book Valuation Approaches and Metrics written by Aswath Damodaran and published by Now Publishers Inc. This book was released on 2005 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: Valuation lies at the heart of much of what we do in finance, whether it is the study of market efficiency and questions about corporate governance or the comparison of different investment decision rules in capital budgeting. In this paper, we consider the theory and evidence on valuation approaches. We begin by surveying the literature on discounted cash flow valuation models, ranging from the first mentions of the dividend discount model to value stocks to the use of excess return models in more recent years. In the second part of the paper, we examine relative valuation models and, in particular, the use of multiples and comparables in valuation and evaluate whether relative valuation models yield more or less precise estimates of value than discounted cash flow models. In the final part of the paper, we set the stage for further research in valuation by noting the estimation challenges we face as companies globalize and become exposed to risk in multiple countries.
Book Synopsis The Origin, Ownership and Use of Cash Flows in Leveraged Buyouts by : Brian Ayash
Download or read book The Origin, Ownership and Use of Cash Flows in Leveraged Buyouts written by Brian Ayash and published by . This book was released on 2019 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses cash flow statements to study leveraged buyouts between 1980 and 2006 of large publicly traded U.S. firms by private equity funds. Presenting the origin, ownership and use of cash in these transactions, I show that once they are controlled by private equity funds, these firms exhibit a significant decline in investment and growth. I also use cash flow statements to evaluate the free cash flow proxies frequently used in the literature and show that the gains in free cash flows are due to significant reduction in investment post-LBO and not operating improvements. These reductions are strongly correlated with declining future growth rates. Finally, I offer an alternative explanation for why firms acquired in leveraged buyouts in the U.S. experience a period of contraction, while those completed in France experience growth: a case of mistaken identity.
Book Synopsis Can the Corporation Survive? by : Michael C. Jensen
Download or read book Can the Corporation Survive? written by Michael C. Jensen and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: One of the tactics politicians use in their quest for power is to draw a false distinction between human rights and property rights. Property rights are, in the last analysis, rights of individuals. As investors, who have a direct stake in the property rights of corporation, become less certain that society will honor those rights, the capitalized values of corporate securities will erode - ultimately to the point that many corporations will be able to remain in business only so long as they can finance their operations from internally generated cash flow or public subsidy.
Book Synopsis Predicting Stock Returns by : David G McMillan
Download or read book Predicting Stock Returns written by David G McMillan and published by Springer. This book was released on 2017-11-30 with total page 141 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides a comprehensive analysis of asset price movement. It examines different aspects of stock return predictability, the interaction between stock return and dividend growth predictability, the relationship between stocks and bonds, and the resulting implications for asset price movement. By contributing to our understanding of the factors that cause price movement, this book will be of benefit to researchers, practitioners and policy makers alike.
Book Synopsis The determinants of stock and bond return comovements by : Lieven Baele
Download or read book The determinants of stock and bond return comovements written by Lieven Baele and published by . This book was released on 2009 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the economic sources of stock-bond return comovements and its time variation using a dynamic factor model. We identify the economic factors employing a semi-structural regime-switching model for state variables such as interest rates, inflation, the output gap, and cash flow growth. We also view risk aversion, uncertainty about inflation and output, and liquidity proxies as additional potential factors. We find that macro-economic fundamentals contribute little to explaining stock and bond return correlations, but that other factors, especially liquidity proxies, play a more important role. The macro factors are still important in fitting bond return volatility; whereas the "variance premium" is critical in explaining stock return volatility. However, the factor model primarily fails in fitting covariances.
