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)both A and B are true.
E)both A and C are true.

Question

Quizplus · Accepted Answer

Studies have shown that there is a positive abnormal return on the day of positive earnings surprises, and also a positive drift in the stock price in the days following the earnings surprise announcement. This suggests that positive earnings surprises are associated with increased investor confidence in the company and its future prospects, leading to higher stock prices.

Studies of Positive Earnings Surprises Have Shown That There Is