Rest in Peace Post-Earnings Announcement Drift

Charles Martineau

Critical Finance Review, 2022, vol. 11, issue 3-4, 613-646

Abstract: This paper revisits price formation following earnings announcements. In modern financial markets, stock prices fully reflect earnings surprises on the announcement date, leading to the disappearance of post-earnings announcement drifts (PEAD). For large stocks, PEAD have been non-existent since 2006 but has only disappeared recently for microcap stocks. PEAD remain a prevalent area of study in finance and accounting despite having largely disappeared. This paper concludes with a set of recommendations for researchers who conduct such studies to better assess the existence of PEAD and suggests future research avenues to examine price formation following earnings news.

Keywords: Earnings announcements; Market efficiency; Post-earnings announcement drifts; Price discovery (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:now:jnlcfr:104.00000122

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