of relevance, we estimate regression equations 1 and 2 at the industry level (two-digit
SIC level for a total of 41 industries) for each year. We obtain the relevance measure for
each industry-year and assign this relevance measure to each firm in the industry for that
year.13 We estimate the two cash flow predictability equations analogously for the
constant sample.
The subperiod analysis and cross-sectional analysis give rise to different number
of observations in FCFO between the constant and full samples. For the constant sample
analysis, there are 1,792 unique firm-subperiod observations (448 firms × 4 subperiods)
of FCFO. For the cross-sectional analysis, there are 1,353 unique industry-year
observations (41 industries × 33 years) of FCFO for the full sample.