Cash Flow Duration and the Term Structure of Equity Returns

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 6043

Classification and Topics

• Classification: Wirtschaft ; Interest Rates: Determination, Term Structure, and Effects ; Asset Pricing; Trading Volume; Bond Interest Rates ; Information and Market Efficiency; Event Studies; Insider Trading
• Subject: dividend strips ; short-sale constraints ; anomalies ; sentiment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Weber, Michael
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/145078
• Last update: 10.03.2025, 11:41 AM CET