Critical Finance Review > Vol 11 > Issue 3-4

Rest in Peace Post-Earnings Announcement Drift

Charles Martineau, University of Toronto, Canada, Charles.Martineau@Rotman.Utoronto.Ca
Suggested Citation
Charles Martineau (2022), "Rest in Peace Post-Earnings Announcement Drift", Critical Finance Review: Vol. 11: No. 3-4, pp 613-646.

Publication Date: 10 Aug 2022
© 2022 C. Martineau
Earnings announcementsMarket efficiencyPost-earnings announcement driftsPrice discovery


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In this article:
1. Overview of the Literature 
2. Data 
3. The Evolution of Price Efficiency Following Earnings Announcements 
4. Implications for Future Studies on Price Formation 
5. Do Prices on Announcement Dates Better Reflect Future Prices? 
6. Conclusion 


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.