Studies of positive earnings surprises have shown that there is
A) a positive abnormal return on the day positive earnings surprises are announced.
B) a positive drift in the stock price on the days following the earnings surprise announcement.
C) a negative drift in the stock price on the days following the earnings surprise announcement.
D) a positive abnormal return on the day positive earnings surprises are announced and a positive drift in the stock price on the days following the earnings surprise announcement.
E) a positive abnormal return on the day positive earnings surprises are announced and a negative drift in the stock price on the days following the earnings surprise announcement.

Question

Quizplus · Accepted Answer

Studies have shown that when companies announce positive earnings surprises, not only do their stock prices typically experience a positive abnormal return on the day of the announcement, but there is also a tendency for the stock price to continue drifting upwards in the days following the announcement. This phenomenon is known as the post-earnings announcement drift (PEAD).

Studies of Positive Earnings Surprises Have Shown That There Is