Short term and long term cash flow volatility and stock return: Empirical evidence from Iran

Abstract

Long term operational cash flow has always been one of the most important items in financial statements. Researches which have been done to date, have focused more on the relative and incremental information content and have had less stress on short term and long term cash flow volatilities. This research studies the relevance of short term and long term cash flow volatilities. The annual percentage of cash flow volatilities are considered as short term cash flow volatility year by year. Operational cash flow variances are applied to calculate long term cash flow volatilities. In this research, the statistical populations are the accepted firms in the Tehran Stock Exchange (TSE), which are selected based on considered preconditions (50 firms are selected over 2002 to 2008). Panel analyses are used for analyzing data. Findings show that volatilities of short term operational cash flows are relevant for determining the expected stock return, while volatilities of long term operational cash flows do not have a meaningful impact on stock return. Key words: Short term cash flows volatilities, long term cash flows volatilities, stock return, relevant- information.