Stochastic idiosyncratic cash flow risk and real options: Implications for stock returns

2017 ◽  
Vol 168 ◽  
pp. 400-431 ◽  
Author(s):  
Harjoat S. Bhamra ◽  
Kyung Hwan Shim
Keyword(s):  
Real Options ◽  
Stock Returns ◽  
Cash Flow ◽  
Cash Flow Risk

scholarly journals Including Cash Flow Risk In Stock Return Analysis

2010 ◽  
Vol 8 (1) ◽  
Author(s):  
Janet West ◽  
Judy Laux
Keyword(s):  
Stock Returns ◽  
Cash Flow ◽  
Explanatory Power ◽  
Ordinary Least Squares ◽  
Theory And Practice ◽  
Capital Asset Pricing ◽  
Least Squares Regression ◽  
Font Size ◽  
Asset Pricing Model ◽  
Cash Flow Risk

<p class="MsoBlockText" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-style: normal; color: black; mso-bidi-font-style: italic; mso-bidi-font-size: 10.0pt;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">Despite their prominence in financial theory and practice, the Capital Asset Pricing Model and its critical beta component have failed test after test to explain stock returns.<span style="mso-spacerun: yes;">&nbsp; </span>Research by Campbell and Vuolteenaho cites the misspecification of beta as the reason for this failure.<span style="mso-spacerun: yes;">&nbsp; </span>They measure beta as the sum of two components: a more influential &ldquo;cash-flow&rdquo; beta and a secondary &ldquo;discount-rate&rdquo; beta.<span style="mso-spacerun: yes;">&nbsp; </span>The current study creates a ratio between the overall beta of a stock and the cash-flow component and uses an ordinary least squares regression model to determine its significance in interpreting overall returns to a stock, hypothesizing that the ratio will better explain returns than the overall beta alone.<span style="mso-spacerun: yes;">&nbsp; </span>The results are mixed but suggest significant explanatory power for the beta range of 0.60 to 0.95.</span></span></span></p>

An Analysis of the Sources of Value Loss Following Financial Restatements

2021 ◽  
pp. 0148558X2198991
Author(s):  
Philip K. Hong ◽  
Jaywon Lee ◽  
Sang-Hyun Park ◽  
Sukesh Patro
Keyword(s):  
Stock Returns ◽  
Cash Flow ◽  
Discount Rate ◽  
Stock Price ◽  
Cash Flows ◽  
Financial Fraud ◽  
Earnings Persistence ◽  
Flow Component ◽  
Financial Restatements ◽  
Value Loss

We decompose the total value loss around firms’ announcements of financial restatements into components arising from investors’ revisions in cash flows and discount rates. First, relative to population benchmarks, restatements represent circumstances in which the cash flow component becomes more important in explaining valuations. While we find significant contributions from both sources, with the cash flow component explaining more than 33% of the variation in stock returns surrounding restatement announcements, this component explains only 13% to 22% in comparable non-restating firms. When restatements are caused by underlying financial fraud, the discount rate impact becomes more important, explaining about 88% of return variation. On the contrary, the cash flow impact is relatively larger for firms with higher earnings persistence or restatements associated with errors. Our decomposition of the value loss helps explain returns in the post-announcement period. Firms with a higher relative discount rate impact experience a significant downward stock price drift after the initial announcement-related price decline. For firms with a higher relative cash flow impact, the evidence suggests the initial impact of the restatement announcement is more complete with no subsequent drift pattern. Our findings close gaps in the evidence on financial restatements and extend the literature on the drivers of stock price movements.

scholarly journals FACTORS AFFECTING OPERATING CASH FLOW TO STOCK RETURN THROUGH STOCK PRICE

2018 ◽  
Vol 5 (2) ◽  
Author(s):  
Aprih . Santoso
Keyword(s):  
Stock Returns ◽  
Cash Flow ◽  
Stock Prices ◽  
Stock Price ◽  
Stock Return ◽  
Stock Exchange ◽  
Sampling Technique ◽  
Financial Statements ◽  
Manufacturing Companies ◽  
Operating Cash Flow

Abstract : Companies need funds in order to carry out operations such as the financing of production activities, pay employees, pay other expenses related to the operation of the company. One way to obtain these funds is to attract investors to invest in companies in the form of stock, but in making this investment is certainly not easy for investors, because investors need consideration beforehand to find out how the company's performance. The purpose of this study was to examine and analyze the effect of operating cash flow to stock return through stock price at companies listed on the Stock Exchange Year 2012-2015. The data used in this study dala are secondary data from the financial statements of companies listed on the Indonesia Stock Exchange period 2012 - 2015. The data are in the form of financial statements can be obtained from the Indonesian Capital Market Directory (ICMD), the IDX website www.idx.co. id as well as from various other sources to support this research. The population in this research is manufacturing companies listed on the Stock Exchange the period 2012 - 2015. The samples taken by the sampling technique used purposive sampling.From the test results and analysis of the data it can be concluded that operating cash flow directly and indirectly has no effect on stock returns through stock prices showed no significant results. Keywords :  Operating Cash Flow, Stock Price, Stocks Return

scholarly journals The effect of debt policy, company value, company size, investment cash flow on stock returns on mining companies listed on Indonesia Stock Exchange

2019 ◽  
Vol 9 (1) ◽  
pp. 99
Author(s):  
Ardhia Prameswari Regita Cahyani ◽  
Carolyn Lukita Sembiring
Keyword(s):  
Financial Performance ◽  
Stock Returns ◽  
Cash Flow ◽  
Firm Value ◽  
Stock Exchange ◽  
Company Size ◽  
Mining Company ◽  
Mining Companies ◽  
Company Value ◽  
Debt Policy

Investment is a delay in consumption now to be allocated to productive assets which are expected to generate profits in the future, which is called stocks return.  Mining company in Indonesia is an attractive sector to invest in stocks because from a geographical perspective, Indonesia is an archipelago structure that contains mining products. There are risks that will be experienced by investors when investing, namely systematic risk and unsystematic risk. Unsystematic risk can be avoided because related to management decisions. Knowing and analyzing the effect of debt policy, firm value, company size, investment cash flow on stock returns on mining companies listed on the Indonesian Stock Exchange. The statistical method used in this study is multiple regression analysis. The sample in this study is a mining company that has go public and published audited financial statements 2013-2017 with 84 data processed consisting of 28 companies each year. The results of hypothesis testing can be concluded that debt policy and firm value have significant effect on stock returns while firm size and investment cash flow does not have significant effect on stock returns. Investor will be interested in investing in companies with good financial performance rather than bad financial performance.

Economics of Making Roadway Pavements Resilient to Climate Change: Use of Discounted Cash Flow and Real Options Analysis

2019 ◽  
Vol 25 (3) ◽  
pp. 04019017 ◽  
Author(s):  
Nivedya M. Kottayi ◽  
Rajib B. Mallick ◽  
Jennifer M. Jacobs ◽  
Jo Sias Daniel
Keyword(s):  
Climate Change ◽  
Real Options ◽  
Cash Flow ◽  
Discounted Cash Flow ◽  
Real Options Analysis
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