Citation

Discussion Paper Details

Please find the details for DP14117 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Cash Flow News and Stock Price Dynamics

Author(s): Davide Pettenuzzo, Riccardo Sabbatucci and Allan Timmermann

Publication Date: November 2019

Keyword(s): Dividend growth, High-frequency cash flow news and Present value model

Programme Area(s): Financial Economics

Abstract: We develop a new approach to modeling dynamics in cash flow data extracted from daily firm-level dividend announcements. We decompose daily cash flow news into a persistent component, jumps, and temporary shocks. Empirically, we find that the persistent cash flow component is a highly significant predictor of future growth in dividends and consumption. Using a log-linearized present value model, we show that news about the persistent dividend growth component helps predict stock returns consistent with asset-pricing constraints implied by this model. News about the daily dividend growth process also helps explain concurrent return volatility and the probability of jumps in stock returns.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14117

Bibliographic Reference

Pettenuzzo, D, Sabbatucci, R and Timmermann, A. 2019. 'Cash Flow News and Stock Price Dynamics'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14117