NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Cash Flow Duration and the Term Structure of Equity Returns

Michael Weber

NBER Working Paper No. 22520
Issued in August 2016
NBER Program(s):Asset Pricing

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.

download in pdf format
   (435 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22520

Published: Michael Weber, 2018. "Cash flow duration and the term structure of equity returns," Journal of Financial Economics, . citation courtesy of

Users who downloaded this paper also downloaded* these:
Cochrane w22485 Macro-Finance
Backus, Boyarchenko, and Chernov w22162 Term Structures of Asset Prices and Returns
Brunnermeier and Sannikov w22533 The I Theory of Money
Bartram, Brown, and Stulz w22492 Why Does Idiosyncratic Risk Increase with Market Risk?
Philippon w22476 The FinTech Opportunity
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us