IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v26y2013i4p841-876.html
   My bibliography  Save this article

What Drives Stock Price Movements?

Author

Listed:
  • Long Chen
  • Zhi Da
  • Xinlei Zhao

Abstract

A central issue in finance is whether stock prices move because of revisions in expected cash flows or discount rates, and by how much of each. Using direct cash flow forecasts, we show that stock returns have a significant cash flow news component whose importance increases with the investment horizon. For horizons over two years, cash flow news is more important. These conclusions hold at both the firm and aggregate levels, and diversification plays a secondary role in affecting the relative importance of cash flow and discount rate news. Our findings highlight the importance of cash flows in asset pricing. The Author 2013. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

Suggested Citation

  • Long Chen & Zhi Da & Xinlei Zhao, 2013. "What Drives Stock Price Movements?," The Review of Financial Studies, Society for Financial Studies, vol. 26(4), pages 841-876.
    • Handle: RePEc:oup:rfinst:v:26:y:2013:i:4:p:841-876
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/rfs/hht005
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:26:y:2013:i:4:p:841-876. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sfsssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.