DEFINITION of 'Seasonality'

A characteristic of a time series in which the data experiences regular and predictable changes which recur every calendar year. Any predictable change or pattern in a time series that recurs or repeats over a one-year period can be said to be seasonal.

Note that seasonal effects are different from cyclical effects, as seasonal cycles are contained within one calendar year, while cyclical effects (such as boosted sales due to low unemployment rates) can span time periods shorter or longer than one calendar year.

BREAKING DOWN 'Seasonality'

Seasonality can be seen in many time series, and it's more common than you might think. For example, if you live in a climate with cold winters and warm summers, your home's heating costs probably rise in the winter and fall in the summer. You would reasonably expect the seasonality of your heating costs to recur every year. Similarly, a company that sells sunscreen and tanning products would see sales jump up in the summer, but drop in the winter. Companies that understand the seasonality of their business can time inventories, staffing and other decisions to coincide with the expected seasonality.

It's important to remember the effects of seasonality when analyzing stocks from a fundamental point of view. For example, if you assumed a sunscreen company was going to earn as much in the next three quarters as it did during the recent summer quarter, your earnings estimates would likely be way off the mark!

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  1. To what extent do seasonal factors influence the utilities sector?

    Seasonal factors have a large impact on the utilities sector, with a significant increase in demand during the summer and ... Read Full Answer >>
  2. How much does seasonality affect the net sales figures of companies, such as retailers?

    Seasonality affects both sales and net sales figures of companies in different ways. For some companies, seasonality has ... Read Full Answer >>
  3. What are the most popular companies in the retail sector?

    Examples of popular companies in the retail sector include Costco, Nordstrom Rack, J. Crew, Sephora, Ikea, The Container ... Read Full Answer >>
  4. Is the banking sector subject to any seasonal trends?

    The banking industry, including retail and investment banks, is subject to seasonal trends. Seasonality is most commonly ... Read Full Answer >>
  5. Are there significant seasonal patterns in the electronics sector?

    There is strong seasonality in the electronics sector, with sales of nearly all kinds of electronics – computers, digital ... Read Full Answer >>
  6. Why is the TTM (trailing twelve months) important in finance?

    Using trailing 12-month (TTM) figures is an effective way to analyze the most recent financial data in an annualized format. ... Read Full Answer >>
  7. Why would you look at year-over-year rather than quarterly growth?

    Growth rates are an important metric for evaluating financial and economic data. Annual growth rates are more commonly cited ... Read Full Answer >>
  8. How does seasonality affect the financial services sector?

    The seasonal trends in financial services vary depending on which subset of financial services is being considered. For example, ... Read Full Answer >>
  9. How does seasonality affect the forest products sector?

    The concept of seasonality comes from the analysis of time series data. A certain data set demonstrates characteristics that ... Read Full Answer >>
  10. Does the consumer price index (CPI) correlate with the change in price of goods and ...

    It is unlikely that the consumer price index (CPI) measures any one individual's exact experience with price changes. Though ... Read Full Answer >>

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