The launch of the single currency in Europe in January 1999 was preceded by a period of regulatory harmonization, convergence in bond yields and inflation rates, and strict fiscal policy across the Eurozone countries. We examine whether the 1990s also were characterized by increased stock market...

Using a new variable based on a model of dividend smoothing, we find dividend growth is highly predictable and cash flow news contributes importantly to return variability. Cash flow betas derived from this predictability are central to explaining the size effect in the cross section of returns....

We study a production-based present-value relation that implies that fluctuations in the marginal profit-to-marginal Q ratio (mq) are driven by variations in the expected growth of marginal profits (cash-flow channel), expected investment return changes (discount-rate channel), or both. We find...