Abstract
Many firms define their fiscal quarters as 13-week periods so that each fiscal year contains 52 weeks, which leaves out one or two day(s) a year. To compensate, one extra week is added every fifth or sixth year and, consequently, one quarter therein comprises 14 weeks. We find evidence of predictable forecast errors and stock returns in 14-week quarters, suggesting that analysts and investors do not, on average, adjust their expectations for the extra week. The ease with which 14-week quarters can be predicted, and expectations adjusted, suggests a surprising lack of effort on the part of analysts and investors.
► Many firms define their fiscal year as a 52/53 week period rather than a 12-month period. ► These firms normally have 13-week quarters except for one 14-week quarter every five or six years. ► Compared to 13-week quarters, revenues and earnings are predictably higher in 14-week quarters. ► However, both analysts and investors do not, on average, adjust their expectations for the extra week. ► Our findings are surprising given the benefits to making the simple adjustment for the extra week.
