An Essay on Cash Flows in Finance

I examine whether stock market anomalies reflect risk compensation or mispricing by analyzing their underlying cash-flow patterns. I distinguish between discrete anomalies based on information events (e.g., profitability) and continuous anomalies lacking such coordinating events (e.g., idiosyncratic volatility). Discrete anomalies exhibit procyclical cash-flow patterns consistent with risk-based pricing. In contrast, continuous anomalies show countercyclical cash-flow patterns that hedge macroeconomic conditions. Building upon Hong and Stein’s (1999) gradual information diffusion framework, I develop a model illustrating the effects of discrete and continuous information arrival on price dynamics. The model shows that discrete information causes immediate price adjustment due to coordinated trading prompted by the simultaneous revelation of information; continuous information leads to initial investor underreaction, subsequent overreaction, and eventual correction. I highlight the important role of the information environment in reflecting the fundamental sources of anomaly returns.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

doctoral

Discipline thesis:degree_discipline

Graduate College

Grantor dc:publisher

The University of Arizona.

Year dc:date.issued

2026

Author dc:creator

• Zhou, Yi

Advisors dc:contributor.advisor

• Bonaime, Alice
• Cederburg, Scott

Committee members dc:contributor.committeemember

• Rossi, Andrea
• Hewitt, Max

• Anomalies
• Cash flows
• Information
• Market efficiency
• Mispricing

Statement dc:rights

• Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction, presentation (such as public display or performance) of protected items is prohibited except with permission of the author.

Licence dc:rights.uri

• http://rightsstatements.org/vocab/InC/1.0/

Language dc:language.iso

en

Handle dc:identifier.uri

http://hdl.handle.net/10150/680308

OAI identifier oai:identifier

oai:repository.arizona.edu:10150/680308