Download or read book What Drives Firm Level Stock Returns written by and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The National Bureau of Economic Research, Inc. presents an abstract for the article entitled "What Drives Firm-Level Stock Returns?" by Tuomo Vuolteenaho and published April 2001. The article discusses the use of a vector autoregressive model (VAR) to decompose a firm's stock return into two components: changes in cash flow expectations and changes in discount rates. Users may purchase the full text of the paper online.
Download or read book What Drives Firm level Stock Returns written by Tuomo Vuolteenaho and published by . This book was released on 2001 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: I use a vector autoregressive model (VAR) to decompose an individual firm's stock return into two components: changes in cash-flow expectations (i.e., cash-flow news) and changes in discount rates (i.e., expected-return news). The VAR yields three main results. First, firm-level stock returns are mainly driven by cash-flow news. For a typical stock, the variance of cash-flow news is more than twice that of expected-return news. Second, shocks to expected returns and cash flows are positively correlated for a typical small stock. Third, expected-return-news series are highly correlated across firms, while cash-flow news can largely be diversified away in aggregate portfolios
Download or read book Do Accruals Drive Firm Level Stock Returns A Variance Decomposition Analysis written by Jeffrey L. Callen and published by . This book was released on 2013 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper extends the variance decomposition framework of Campbell (1991), Campbell and Ammer (1993) and Vuolteenaho (2002) to address the relative value relevance of accrual news, cash flow news and expected return news in driving firm-level equity returns. The extension is based on the Feltham-Ohlson (1995, 1996) clean surplus relations. Using three models, this study shows that all three factors, accruals, cash flows and expected future discount rates are value relevant. Moreover, accrual news is found to significantly dominate expected-return news in driving firm-level stock returns. Operating income news is also found to significantly dominate both expected-return news and free cash flow news in driving firm-level stock returns. Furthermore, after splitting net income into cash flow and accrual earnings components in the Vuolteenaho (2002) model, accrual earnings news and cash flow earnings news are found to equally drive firm-level stock returns and to dominate expected-return news. Further disaggregation of the data yields some evidence that accrual earnings news is a more important factor than cash flow earnings news in driving current stock returns. Overall, the three models indicate that changes in expected future accruals are a primary driver, if not the primary driver, of current stock returns.
Download or read book Predicting Firm Level Stock Returns written by David G. McMillan and published by . This book was released on 2017 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the predictive ability of several stock price ratios, stock return dispersion and distribution for individual firm level stock returns. Analysis typically focusses on market level returns, however, for the asset pricing model that underlies predictability to hold, firm-level predictability should also be present. In addition, we examine the economic content of predictability by considering whether the predictive coefficient has the theoretically correct sign and whether it is related to future output growth. Movement in stock returns should reflect investor expectations regarding future economic conditions. While stock returns are often too noisy to act as predictors for future economic behaviour, factors that predict stock returns should equally have predictive power for output growth. In our analysis, we use the time-varying predictive coefficient to predict output growth, as the coefficient reflects the sensitivity of stock returns to the predictor variable and thus can be regarded as investors' confidence in the predictive relation. The results suggest that several stock price ratios have predictive power for individual firm stock returns, exhibit the correct coefficient sign and has predictive power for output growth. Each of these ratios has a measure of fundamentals dividend by the stock price and has a positive predictive relation with stock returns and output growth. This implies that as investors expect future economic conditions to improve and earnings and dividends to rise, so expected stock returns will increase. This supports the stock return predictive relation that arises through the cash flow channel.
Download or read book Stock Returns and Volatility written by Gregory R. Duffee and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: It has been previously documented that individual firms' stock return volatility rises after stock prices fall. This paper finds that this statistical relation is largely due to a positive contemporaneous relation between firm stock returns and firm stock return volatility. This positive relation is strongest for both small firms and firms with little financial leverage. At the aggregate level, the sign of this contemporaneous relation is reversed. The reasons for the difference between the aggregate- and firm-level relations are explored.
Download or read book Firm Level Evidenceon International Stock Market Comovement written by Mr.Marco Del Negro and published by International Monetary Fund. This book was released on 2003-03-01 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore the link between international stock market comovement and the degree to which firms operate globally. Using stock returns and balance sheet data for companies in 20 countries, we estimate a factor model that decomposes stock returns into global, country-specific and industry-specific shocks. We find a large and highly significant link: on average, a firm raising its international sales by 10 percent raises the exposure of its stock return to global shocks by 2 percent and reduces its exposure to country-specific shocks by 1.5 percent. This link has grown stronger since the mid-1980s.
Download or read book Growth Or Glamour written by John Y. Campbell and published by . This book was released on 2005 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: The cash flows of growth stocks are particularly sensitive to temporary movements in aggregate stock prices (driven by movements in the equity risk premium), while the cash flows of value stocks are particularly sensitive to permanent movements in aggregate stock prices (driven by market-wide shocks to cash flows.) Thus the high betas of growth stocks with the market's discount-rate shocks, and of value stocks with the market's cash-flow shocks, are determined by the cash-flow fundamentals of growth and value companies. Growth stocks are not merely "glamour stocks" whose systematic risks are purely driven by investor sentiment. More generally, accounting measures of firm-level risk have predictive power for firms' betas with market-wide cash flows, and this predictive power arises from the behavior of firms' cash flows. The systematic risks of stocks with similar accounting characteristics are primarily driven by the systematic risks of their fundamentals.
Download or read book The Econometric Analysis of Models with Risk Terms written by A. R. Pagan and published by London : Centre for Decision Sciences and Econometrics, University of Western Ontario. This book was released on 1986 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Do Accruals Drive Stock Returns A Variance Decomposition Analysis written by Jeffrey L. Callen and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper extends the variance decomposition framework of Campbell (1991), Campbell and Ammer (1993) and Vuolteenhao (2002) to address the relative value relevance of accruals news, cash flow news and expected return news in driving firm-level equity returns. The extension is based on the Feltham-Ohlson (1995, 1996) clean surplus relations. Accruals news is found to significantly dominate expected-return news in driving firm-level stock returns. Operating income news is also found to significantly dominate both expected-return news and free cash flow news in driving firm-level stock returns. Furthermore, after splitting net income into cash flow and accrual earnings components in the Vuolteenhao (2000) model, accrual earnings news is found to significantly dominate both expected-return news and cash flow earnings news in driving firm-level stock returns. Overall, these three results indicate that changes in expected future accruals are the primary driver of current stock returns rather than changes in expected future cash flows or future discount rates.
Download or read book What Drives Firm level Stock Retruns written by T. Vuolyteenaho and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Firm level Risk Exposures and Stock Returns in the Wake of COVID 19 written by Steven J. Davis and published by . This book was released on 2020 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt: Firm-level stock returns differ enormously in reaction to COVID-19 news. We characterize these reactions using the Risk Factors discussions in pre-pandemic 10-K filings and two text-analytic approaches: expert-curated dictionaries and supervised machine learning (ML). Bad COVID-19 news lowers returns for firms with high exposures to travel, traditional retail, aircraft production and energy supply -- directly and via downstream demand linkages -- and raises them for firms with high exposures to healthcare policy, e-commerce, web services, drug trials and materials that feed into supply chains for semiconductors, cloud computing and telecommunications. Monetary and fiscal policy responses to the pandemic strongly impact firm-level returns as well, but differently than pandemic news. Despite methodological differences, dictionary and ML approaches yield remarkably congruent return predictions. Importantly though, ML operates on a vastly larger feature space, yielding richer characterizations of risk exposures and outperforming the dictionary approach in goodness-of-fit. By integrating elements of both approaches, we uncover new risk factors and sharpen our explanations for firm-level returns. To illustrate the broader utility of our methods, we also apply them to explain firm-level returns in reaction to the March 2020 Super Tuesday election results.
Download or read book The Local Impact of Global Flows on U S Firm Level Stock Returns written by Matthew Wynter and published by . This book was released on 2017 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: From 1977 to 2013, bilateral stock flows between investors in the United States and foreign countries grew nearly tenfold. I study how this international flow of capital influences U.S. firm-level stock returns. I show that firms with low sensitivity to international stock flows have higher average returns than firms with high sensitivity, a difference of 3.264% per year. The negative association displays little variation with the market and is concentrated in periods that follow a decrease in the VIX index. Taken together, the findings are most consistent with theories that identify uncertainty as an important factor for international stock flows.
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.
Download or read book The Econometrics of Financial Markets written by John Y. Campbell and published by Princeton University Press. This book was released on 2012-06-28 with total page 630 pages. Available in PDF, EPUB and Kindle. Book excerpt: The past twenty years have seen an extraordinary growth in the use of quantitative methods in financial markets. Finance professionals now routinely use sophisticated statistical techniques in portfolio management, proprietary trading, risk management, financial consulting, and securities regulation. This graduate-level textbook is intended for PhD students, advanced MBA students, and industry professionals interested in the econometrics of financial modeling. The book covers the entire spectrum of empirical finance, including: the predictability of asset returns, tests of the Random Walk Hypothesis, the microstructure of securities markets, event analysis, the Capital Asset Pricing Model and the Arbitrage Pricing Theory, the term structure of interest rates, dynamic models of economic equilibrium, and nonlinear financial models such as ARCH, neural networks, statistical fractals, and chaos theory. Each chapter develops statistical techniques within the context of a particular financial application. This exciting new text contains a unique and accessible combination of theory and practice, bringing state-of-the-art statistical techniques to the forefront of financial applications. Each chapter also includes a discussion of recent empirical evidence, for example, the rejection of the Random Walk Hypothesis, as well as problems designed to help readers incorporate what they have read into their own applications.
Download or read book Super Stocks written by Kenneth L. Fisher and published by McGraw Hill Professional. This book was released on 2007-10-12 with total page 290 pages. Available in PDF, EPUB and Kindle. Book excerpt: Target the Super Stocks that deliver huge returns One of the most successful investing books ever published, Super Stocks showed investors how to use innovative techniques and fundamental analysis for valuing stocks and predicting future profit margins. You'll gain valuable insight into Fisher's original thinkin for valuing stocks and predicting future profit margins. A pioneer in the use of the Price Sales Ratio-a powerful analytical tool-Fisher regales readers with instructive tales of the businesses he invested in and profited from. Super Stocks gives a historical perspective on how Fisher successfully researched companies and stocks—who he saw and what he asked—to get a better read on profitable returns. “As rich in investment war stories as it is in knowledge.”-The Motley Fool
Download or read book What Drives Firm level Returns written by Tuomo Vuolteenaho and published by . This book was released on 2001 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book What Drives Firm level Consensus Growth Forecasts Cash Flow News Or Expected Return News written by Giao X. Nguyen and published by ProQuest. This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent findings in the finance literature document that analysts adjust their growth forecasts in response to major news, proxied by large changes in company stock price. However, Campbell and Shiller (1988) argue that stock prices, themselves, carry two sets of information: news about changes in cash-flow expectation (i.e. cash flow news) and changes in discount rate (i.e. expected return news). The former one directly relates to changes in expectation about the fundamentals of the company while the latter one to the changes in market expectation. Hence, are analysts more concerned about expectation of the permanent movement in the stock price (cash flow news) or the temporary movement in the stock price (expected return news)? In this study, I use a firm-level vector autoregressive approach to examine the relative impact of cash flow news and expected return news on unexpected changes in analysts next fiscal year growth forecasts. My findings indicate that analysts do raise their forecasts on positive cash flow news. However, the magnitude of the response to cash flow news is significantly lower than the magnitude of the response to expected return news. This suggests that while analysts do react to changes in firm fundamentals, they respond more strongly to changes in future expected return.
