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...

A crucial issue in asset pricing is to understand the relative importance of discount rate (DR) news and cash flow (CF) news in driving the time-series and cross-sectional variations of stock returns. Many studies directly estimate the DR news but back out the CF news as the residual. We argue...