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Earnings, Cash Flows and Security Returns Over Long Return Intervals: Analysis and UK Evidence
Author(s) -
Charitou Andreas,
Clubb Colin
Publication year - 1999
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00257
Subject(s) - cash flow , valuation (finance) , cash on cash return , earnings , cash flow statement , operating cash flow , econometrics , cash flow forecasting , economics , terminal value , actuarial science , cash and cash equivalents , financial economics , finance
The aim of this paper is to provide a fuller understanding of the process linking security returns and accounting data by focusing on the effect of long return intervals on the association between security returns and earnings and cash flow variables. First, we develop a theoretical basis for empirical analysis of the relationship between security returns and cash flow data over long return intervals. Second, we carry out empirical analysis of both the information content of cash flow variables and the incremental information content of accounting earnings and cash flows using UK data over the period 1985–92 for annual, two year and four year return intervals. Our results provide strong evidence of the valuation relevance of cash flow information for the dataset examined.