Cash Flow Duration and the Term Structure of Equity Returns

Michael Weber and Michael Weber
Authors registered in the RePEc Author Service: Michael Weber

No 6043, CESifo Working Paper Series from CESifo

Abstract: 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. 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.

Keywords: dividend strips; short-sale constraints; anomalies; sentiment (search for similar items in EconPapers)
JEL-codes: E43 G12 G14 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Cash flow duration and the term structure of equity returns (2018)
Working Paper: Cash Flow Duration and the Term Structure of Equity Returns (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6043

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