Post earnings announcement drift
- Post earnings announcement drift
The post earnings announcement drift anomaly means the tendency for stocks to earn abnormally high returns in the three quarters following a positive earnings announcement, and to earn abnormally low returns in the three quarters following a negative earnings announcement.
The phenomenon can be explained with a number of hypotheses. The most widely accepted explanation for the effect is investor under-reaction to earnings announcements.
This was initially proposed by the information content study of R. Ball & P. Brown, 'An empirical evaluation of accounting income numbers', "Journal of Accounting Research", Autumn 1968, pp. 159-178.
References
* Do Individual Investors Drive Post Earnings Announcement Drift? OSU Finance [http://www.cob.ohio-state.edu/fin/dice/papers/2002/2002-2.pdf Working Paper]
ee also
*Earnings response coefficient
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