Why do stock prices vary? Using survey forecasts, we find that cash flow growth expectations explain most movements in the S&P 500 price-dividend and price-earnings ratios, accounting for at least 93% and 63% of their variation. These expectations comove strongly with price ratios, even when price ratios do not predict future cash flow growth. In comparison, return expectations have low volatility and small comovement with price ratios. Short-term, rather than long-term, expectations account for most price ratio variation. We propose an asset pricing model with beliefs about earnings growth reversal that accurately replicates these cash flow growth expectations and dynamics.A CENTRAL QUESTION IN FINANCE IS WHAT drives stock price movements. Specifically, researchers want to know what explains the large movements in the aggregate price-dividend ratio, a measure of how cheap or expensive stocks are at a given time. Based on the present value approach, for any investor that prices the stock, the stock's price should equal her expected discounted value of future dividends. This is true whether her expectations match an objective probability distribution or they come from a subjective distribution. Price changes should therefore be due to changes in her dividend expectations or her return expectations, and changes in the price-dividend ratio should be due to changes in her dividend growth expectations or return expectations.The challenge is determining the expectations of market participants. If investors have rational expectations, then we can infer the importance of

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