RT Journal Article SR Electronic T1 Special Items and Stock Returns JF The Journal of Investing FD Institutional Investor Journals SP joi.2021.1.182 DO 10.3905/joi.2021.1.182 A1 Lingjie Ma YR 2021 UL https://pm-research.com/content/early/2021/05/31/joi.2021.1.182.abstract AB This article examines the special items in companies’ income statements, with a focus on the heterogeneous impacts on stock returns in the North American region. Using monthly data from December 1997–December 2013, the author documents that companies that reported negative special items during the previous quarter have a higher probability of doing so in the following quarter. He constructs a nonparametric factor based on the sign of special items over time and finds that the left tail is associated with the most significant underperformance in the equity market. In an out-of-sample analysis for a stock selection strategy, the results show that companies in the left tail underperformed their sector by 7.20% annually in Canada and 4.27% in all of North America. TOPICS: Security analysis and valuation, developed markets, quantitative methods, statistical methods, performance measurementKey Findings▪ This article employs a nonparametric approach to capture the sign persistency of negative special items.▪ This article investigates the heterogeneous effects of negative special items on stock returns.▪ This article conducts an out-of-sample study showing the forecasting power of the left tail in a stock selection strategy.