The paper derives and tests the relationship between current-period unexpected returns and unexpected earnings that incorporates cashflow news and cashflow risk． A new multi-variable model based on a three-variable model is established to explain the unexpected individual stock returns． The paper estimates the model using data for individual stocks in China’s market from 2002 to 2011． The main findings are: (i) The result of the cashflow news derived by revisions in forecasts of future earnings is an important determinant of cross-sectional unexpected stock returns and realized stock returns and excess stock returns; (ⅱ) The cashflow risk thus derived to reflect systematic risk can explain expected stock returns; (ⅲ) The new multi-variable model based on the three-variable of model and considering cashflow news and cashflow risk dominates the multi-variable model based based on the three-factor model Fama-French and considering cashflow news and cashflow risk in explaining excess stock returns．