Out-of-sample cash flow prediction and cash distributions to shareholders

2011 ◽  
Vol 27 (1) ◽  
pp. 1-9 ◽  
Author(s):  
Rick N. Francis
Keyword(s):  
Cash Flow ◽  
Flow Prediction ◽  
Out Of Sample

Usefulness of Accounting Estimates

2016 ◽  
Vol 32 (1) ◽  
pp. 123-135 ◽  
Author(s):  
Li Li Eng ◽  
Thanyaluk Vichitsarawong
Keyword(s):  
Cash Flow ◽  
Exploratory Study ◽  
Abnormal Returns ◽  
Cash Flows ◽  
Recent Period ◽  
Future Earnings ◽  
China And India ◽  
Accounting Estimates ◽  
Out Of Sample ◽  
Over Time

This is an exploratory study to examine the quality or usefulness of accounting estimates of companies in China and India over time. Specifically, we examine how well the accounting estimates are able to predict future earnings and cash flows during the period 2003-2013. The results for India indicate that the out-of-sample earnings and cash flow predictions derived are more accurate and more efficient in the more recent period (2010-2013) than the earlier period (2003-2006). In contrast, the out-of-sample earnings and cash flow predictions for China are generally more biased, less accurate, and less efficient. The results indicate abnormal returns earned on hedge portfolios formed on earnings (cash flow) predictions for India in the recent period. In contrast, none of the portfolios for China earn positive returns. The results suggest that the accounting estimates in India in recent years have become better predictors of future earnings and cash flow than accounting estimates in the earlier period. However, the accounting estimates in China are not relevant for predicting earnings and cash flows over the years in the sample period.

scholarly journals Usefulness of fair valuation of biological assets for cash flow prediction

2017 ◽  
Vol 47 (2) ◽  
pp. 157-180 ◽  
Author(s):  
Josep Maria Argilés-Bosch ◽  
Meritxell Miarons ◽  
Josep Garcia-Blandon ◽  
Carmen Benavente ◽  
Diego Ravenda
Keyword(s):  
Cash Flow ◽  
Flow Prediction ◽  
Fair Valuation

Accruals, Accounting-Based Valuation Models, and the Prediction of Equity Values

2005 ◽  
Vol 20 (4) ◽  
pp. 311-345 ◽  
Author(s):  
Mary E. Barth ◽  
William H. Beaver ◽  
John R. M. Hand ◽  
Wayne R. Landsman
Keyword(s):  
Cash Flow ◽  
Model Parameters ◽  
Prediction Errors ◽  
Equity Values ◽  
Valuation Model ◽  
Equity Value ◽  
Out Of Sample ◽  
Other Information ◽  
Linear Information ◽  
Information Valuation

This study uses out-of-sample equity value estimates to determine whether earnings disaggregation, imposing linear information valuation model (LIM) structure and separate industry estimation of valuation model parameters aid in predicting contemporaneous equity values. We consider three levels of earnings disaggregation: aggregate earnings, cashflow and total accruals and cash flow and four major components of accruals. For pooled estimations, imposing the LIM structure results in significantly smaller prediction errors; for by-industry estimations, it does not. However, by-industry prediction errors are substantially smaller, suggesting that the by-industry estimations are better specified. Mean squared and absolute prediction errors are smallest when earnings are disaggregated into cash flow and major accrual components; median prediction errors are smallest when earnings are disaggregated into cash flow and total accruals. These findings suggest that (1) if concern is with errors in the tails of the equity value prediction error distribution, then earnings should be disaggregated into cash flow and the major accrual components; otherwise earnings should be disaggregated only into cash flow and total accruals; (2) imposing the LIM structure neither increases nor decreases prediction errors, which supports the efficacy of drawing inferences from valuation equations based on residual income models that do not impose the structure implied by the model; (3) valuation of abnormal earnings, accruals, accrual components, equity book value, and other information varies significantly across industries.

scholarly journals Cash Flow and Discount Rate Risk in Up and Down Markets: What Is Actually Priced?

2012 ◽  
Vol 47 (6) ◽  
pp. 1279-1301 ◽  
Author(s):  
Mahmoud Botshekan ◽  
Roman Kraeussl ◽  
Andre Lucas
Keyword(s):  
Cash Flow ◽  
Discount Rate ◽  
Predictive Ability ◽  
Decomposition Methods ◽  
Return Decomposition ◽  
Rate Risk ◽  
Related Risk ◽  
Out Of Sample ◽  
Asymmetric Preferences ◽  
Cash Flow Risk

AbstractWe test whether asymmetric preferences for losses versus gains affect the prices of cash flow versus discount rate risk. We construct a return decomposition distinguishing cash flow and discount rate betas in up and down markets. Using U.S. data, we find that downside cash flow and discount rate betas carry the largest premia. Downside cash flow risk is priced consistently across different samples, periods, and return decomposition methods. It is the only component of beta with significant out-of-sample predictive ability. Downside cash flow premia mainly occur for small stocks, while large stocks are compensated for symmetric cash-flow-related risk.

scholarly journals Predicting Cash Flow From Operations: Evidence On The Comparative Abilities For A Continuum Of Measures

2011 ◽  
Vol 17 (3) ◽  
Author(s):  
Charles E. Jordan ◽  
Marilyn A. Waldron
Keyword(s):  
Conceptual Framework ◽  
Cash Flow ◽  
Prediction Models ◽  
Petroleum Industry ◽  
Cash Flows ◽  
Predictor Variables ◽  
Accrual Accounting ◽  
Operating Cash Flows ◽  
Flow Prediction ◽  
Cash Basis

Prior studies have attempted to confirm or reject the FASB's assertion in its Conceptual Framework that accrual accounting measures provide better information for predicting cash flows than do cash basis measures.  However, their results proved largely inconclusive and contradictory.  The current study identifies research constructs that may be driven these inconsistent findings and makes adjustments to mitigate their effects.  Univariate cash flow prediction models are developed for companies in the petroleum industry using a continuum of predictor variables.  In predicting operating cash flows, one variable, net earnings plus depreciation and amortization, consistently achieves superior results.

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