Stock Returns and Cash Flows: A New Asset Pricing Approach

Sonia Di Tomaso, Denis Marco Montagna and Antonio Amendola ()
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Antonio Amendola: University of Pavia

Journal of Economics and Financial Analysis, 2021, vol. 5, issue 2, 85-120

Abstract: This study is focused on a non-conventional profitability measure, at least in terms of assets pricing models, where dividends or profits are widely used. The attention is focused on a proxy measure of Operating Cash Flows: the "Ebitda after Capex". The relationship returns – cash flows' volatility has been examined through an empirical analysis conducted on the stocks of the S&P500 Index combining the main quantitative and statistical approach with a qualitative overview respect the macroeconomic background. Starting from a correlation rolling window approach, three different regressions techniques have been implemented; the simple Ordinary Least Squares regressions (OLS), the linear Quantile (LQR) regression and the Multiple regression model (MLR), all performed at different levels in terms of stocks (QoQ and YoY) and sectors (MoM, QoQ, YoY). The cross-sectional and time-series results support the effects of cash flow volatility on the stocks' performance and highlighted its sensitivity respect not only the different short-term and long-term horizons, but also in terms of sector' exposure.

Keywords: Asset Pricing; Volatility; Return; Quantile Regression; Cash Flow; Financial Modelling; CAPM; Fama-French Models. (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:trp:01jefa:jefa0051

DOI: 10.1991/jefa.v5i2.a47

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