Time-Series Properties and Pricing of the Special Items Component of Earnings

39 Pages Posted: 18 May 1999

See all articles by David Burgstahler

David Burgstahler

University of Washington

James J. Jiambalvo

University of Washington - Michael G. Foster School of Business

Terry J. Shevlin

University of California-Irvine

Date Written: May 3, 1999

Abstract

We demonstrate that the effect of special items on the time-series of seasonally-differenced quarterly earnings differs from the effect of other components of earnings. Focusing on earnings four quarters subsequent to the special item where the time-series differences are most pronounced, we also demonstrate that market expectations of earnings impounded in prices reflect these time-series differences. Further, our estimates suggest that the proportion of the time-series implications of special items impounded in prices is larger than the proportion for other, non-special items, components of earnings. Nonetheless, market prices do not fully reflect time-series implications of special items ? a significant proportion of the time-series implications of negative special items is not impounded in prices and past values of special items predict subsequent abnormal returns.

JEL Classification: M41, G14, C22

Suggested Citation

Burgstahler, David C. and Jiambalvo, James J. and Shevlin, Terry J., Time-Series Properties and Pricing of the Special Items Component of Earnings (May 3, 1999). Available at SSRN: https://ssrn.com/abstract=163317 or http://dx.doi.org/10.2139/ssrn.163317

David C. Burgstahler (Contact Author)

University of Washington ( email )

555 Paccar Hall, Box 353226
Seattle, WA 98195-3226
United States
206-543-6316 (Phone)
206-685-9392 (Fax)

James J. Jiambalvo

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States
206-543-9132 (Phone)
206-685-9392 (Fax)

Terry J. Shevlin

University of California-Irvine ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States
2065509891 (Phone)

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