Cash Flow Timing and the Cross-section of Expected Returns

Popular measures of stocks' cash-flow duration mix up information on discount rates and the timing of cash flows leading to a mechanical relation between duration and expected returns. This is problematic when studying the relation between cash-flow timing and average returns. This is because the employed measures are monotonic
functions of market prices and therefore of each stocks' true market discount rate - the actual object of interest. Using measures of cash-
ow timing, we find no unconditional relation between timing and expected returns. In recessions however, long timing stocks have on average lower returns.

Austrian Science Fund