Cash Flow, Earnings Revisions Method To Evaluate Systematic Risk Of Stock Market

The return of stocks are partially driven by changes in their expected cashflo w. Usingrevisions in analysts earnings forecasts, we can construct an analyst earnings beta thatmeasures the covariance between the cashflos innovations of an asset and those of themarket. A higher analyst earnings beta implies greater sensitivity to marketwide revisionsin expected cashflow, and therefore higher systematic risk. The analyst earnings betacaptures exposure to macroeconomic fluctuations and has a positive risk premium thatprovides a partial explanation for the value premium, size premium, The capital assetpricing model, risk assets are considered income by the system risk decision. Systemicrisk through a combination with beta single asset or portfolio of assets to measure thecovariance of the market. Meanwhile, shares of listed companies on this particular riskassets, and foreign scholars dynamic Gordon model proposed future dividends on stockprice than the decomposition rate of future earnings and future dividend growth ofinformation and it indicates that the current the stock price includes future returns andfuture dividend growth. On this basis, foreign scholars in turn gains beyond the expectedreturn of risky assets broken down into cash flow of information and information anddiscount rate.When cash flow information and discount rate information and estimates of futuresimulations, the more popular methods is to generate future domestic use variable vectorautoregression method to achieve the prediction and simulation results. This article neveranother point, referring to the experience of previous multi-part stock expected returnthan the non-cash flow information is used to simulate the analysts’ earnings forecasts bydividing a three-stage model and year12month analysis by the seller teacher forecast dataon earnings (EPS) and return on equity (ROE) growth rate of cash flow information aresimulated. Select a sample of490listed companies, and a comparison group obtained reflect the cash flow risk of beta, the results indicate that the disk companies and growthcompanies on the market is most sensitive to changes in cash flow, that is, has a relativelylarge systemic risk. Beta beta risk and cash flow and the capital asset pricing model werecompared, the conclusion is obtained in this paper to explain the ability of non-betaexpected return assets, and the capital asset pricing model than the beta contains moreinformation. Finally, in order to find the support of cash flow information may reflectsystemic risk evidence will be cash flow information and variab les made a return tomacroeconomic factors, the results indicate that reflect the financial environment forcredit spreads and spreads term changes in cash flow information is coverage, but thecoverage of the CPI and the real estate index information ineffective.The proposed method can be widely used, and cash flow information can be used inother studies or practice.