A central issue in asset pricing is whether stock prices move due to the revisions of expected future cash ows or/and revisions of expected discount rates, and by how much of each. Using direct cash ow forecasts, we show that there is a signicant component of cash ow news in stock returns, whose importance relative to the discount rate news increases with investment horizons. For horizons over two years, the importance of cash ow news far exceeds that of discount rate news. These conclusions hold at both the rm and aggregate levels, and diversication only plays a secondary role in aecting the relative importance of cash ow/discount rate news. The conventional wisdom that cash ow news dominates at the rm level but discount rate news dominates at the aggregate level is driven by applying the predictive regression method inconsistently.