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Rest in Peace Post-Earnings Announcement Drift

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  • Charles Martineau

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.

Suggested Citation

  • Charles Martineau, 2022. "Rest in Peace Post-Earnings Announcement Drift," Critical Finance Review, now publishers, vol. 11(3-4), pages 613-646, August.
    • Handle: RePEc:now:jnlcfr:104.00000122
    DOI: 10.1561/104.00000122
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    More about this item

    Keywords

    Earnings announcements; Market efficiency; Post-earnings announcement drifts; Price discovery;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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