Companies that report good news earnings surprises tend to have an upward drift in stock returns before the actual earnings announcement date followed by an increase in stock returns at the announcement date.

Question

Quizplus · Accepted Answer

This is a well-documented phenomenon in finance known as the "pre-announcement drift." When companies report unexpectedly positive earnings news, investors may start to buy the stock in anticipation of good news, leading to an increase in stock price before the actual earnings announcement. This effect can be seen in academic studies and in real-world stock market data.

Companies That Report Good News Earnings Surprises Tend to Have