Abstract
This paper examines the relative value relevance of accruals and cash flows in driving firm―level stock returns, based on the Vuolteenaho［2002］model. The variance decomposition analysis is implemented using a vector autoregressive model. Overall, cash flow news is found to significantly dominate expected return news and accounting accruals news. As it is positively correlated with future cash flows after 1990, discretionary accruals news dominates nondiscretionary news.
