in cash-flow expectations (i.e., cash-flow news) and changes in discount rates (i.e., expected-return news). The VAR … yields three main results. First, firm-level stock returns are mainly driven by cash-flow news. For a typical stock, the … variance of cash-flow news is more than twice that of expected-return news. Second, shocks to expected returns and cash flows …

's discount-rate shocks, and of value stocks with the market's cash-flow shocks, are determined by the cash-flow fundamentals of …