Post earnings announcement drift

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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.

[edit] References

  • Do Individual Investors Drive Post Earnings Announcement Drift? OSU Finance Working Paper
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