VarCF · Cash flow risk · Haugen and Baker (1996)

Cash-flow to price variance

Long minus short quintile portfolio, value-weighted, market-adjusted. Quarterly, 1953Q3 to 2024Q4.

Expected return · posterior mean, % per quarter

Next quarter

1.27%

95% interval −0.04% to 2.60%

Next year

1.13%

95% interval −0.05% to 2.37%

Next five years

0.72%

95% interval −0.29% to 1.83%

Next quarter

1.36%

95% interval −0.66% to 3.33%

Next year

1.13%

95% interval −0.65% to 2.93%

Next five years

0.46%

95% interval −0.84% to 1.96%

Next quarter

1.66%

95% interval −0.09% to 3.13%

Next year

1.45%

95% interval −0.12% to 2.92%

Next five years

0.86%

95% interval −0.56% to 2.39%

Next quarter

2.74%

95% interval −0.33% to 5.20%

Next year

2.28%

95% interval −0.35% to 4.54%

Next five years

0.95%

95% interval −0.77% to 2.87%

Cumulative market-adjusted return

+124% since 1953Q3 · log scale

Window	Mean	Vol.	Sharpe	t
1953Q3–2024Q4	2.24%	14.81%	0.15	1.28
2020Q1–2024Q4	4.01%	22.07%	0.18	0.41
2024Q1–2024Q4	30.07%	11.21%	2.68	2.68
1953Q3–2024Q4	0.36%	18.88%	0.02	0.16
2020Q1–2024Q4	7.54%	26.69%	0.28	0.63
2024Q1–2024Q4	24.26%	14.97%	1.62	1.62
1953Q3–2024Q4	2.42%	20.10%	0.12	1.02
2020Q1–2024Q4	10.79%	33.95%	0.32	0.71
2024Q1–2024Q4	22.49%	9.29%	2.42	2.42
1953Q3–2024Q4	0.88%	22.91%	0.04	0.32
2020Q1–2024Q4	13.83%	34.32%	0.40	0.90
2024Q1–2024Q4	35.25%	26.79%	1.32	1.32

Horizon	Mean	95% interval	P(neg)
Next quarter	0.173	−0.006 – 0.356	0.03
Next year	0.153	−0.006 – 0.322	0.03
Next five years	0.097	−0.038 – 0.247	0.08
Next quarter	0.145	−0.069 – 0.359	0.12
Next year	0.120	−0.069 – 0.314	0.13
Next five years	0.049	−0.089 – 0.208	0.27
Next quarter	0.166	−0.009 – 0.316	0.03
Next year	0.145	−0.012 – 0.292	0.04
Next five years	0.085	−0.056 – 0.238	0.12
Next quarter	0.242	−0.029 – 0.464	0.04
Next year	0.200	−0.030 – 0.401	0.05
Next five years	0.083	−0.067 – 0.250	0.15