dividends. We show both theoretically and empirically that dividends signal safer, rather than higher, future profits. Using the … model's predictions, cash-flow volatility changes in the opposite direction from that of dividend changes and larger changes … supports the prediction - unique to our model - that the cost of the signal is foregone investment opportunities. We conclude …

back on work in industrial organization, we analyze the relationship between profit persistence and expected stock returns …. We show that long-run profit persistence together with other additional economic firm fundamentals have a significant …