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

Question

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Companies that report bad news earnings surprises typically experience a downward drift in stock returns before the actual earnings announcement date, as the market may anticipate the bad news, followed by a further decrease in stock returns at the announcement date.

Companies That Report Bad News Earnings Surprises Tend to Have