Keeping It Simple: How Post-earnings Return Drift Can Exist and Not Exist Simultaneously

Some authors use 18 quadrillion regressions to conclude that post-earnings announcement drift (PEAD) is a major factor in the stock market. Some other authors find strong evidence of PEAD with t-statistics exceeding 14. However, at least one author argues that earnings drift does not exist in equities. This paper tries to resolve this conflict by replicating the procedure to generate the earnings drift factor, and indeed finds that earnings drift does not exist in all but microcaps. It stands to reason that for the bulk of market capitalization, there is no earnings drift. It is also shown that some conclusions relating to the significance of PEAD arise from using non-standard methods and interpretations.

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Publication Details

Journal
Journal of Investment and Management
Published
2026-03-14
DOI
https://doi.org/10.11648/j.jim.20261501.11
Primary Topic
Auditing, Earnings Management, Governance
Type
article
Field-Weighted Citation Impact
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article

Keeping It Simple: How Post-earnings Return Drift Can Exist and Not Exist Simultaneously

Avanidhar Subrahmanyam
Journal of Investment and Management
Auditing, Earnings Management, Governance
article

Keeping It Simple: How Post-earnings Return Drift Can Exist and Not Exist Simultaneously

Avanidhar Subrahmanyam
article en

Abstract

Some authors use 18 quadrillion regressions to conclude that post-earnings announcement drift (PEAD) is a major factor in the stock market. Some other authors find strong evidence of PEAD with t-statistics exceeding 14. However, at least one author argues that earnings drift does not exist in equities. This paper tries to resolve this conflict by replicating the procedure to generate the earnings drift factor, and indeed finds that earnings drift does not exist in all but microcaps. It stands to reason that for the bulk of market capitalization, there is no earnings drift. It is also shown that some conclusions relating to the significance of PEAD arise from using non-standard methods and interpretations.

Journal of Investment and ManagementVol. 15(1)
Anderson University - South Carolina (US)
Decent work and economic growth
Openalex Percentile: Top 12%
Auditing, Earnings Management, Governance
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Keeping It Simple: How Post-earnings Return Drift Can Exist and Not Exist Simultaneously — Avanidhar Subrahmanyam · Journal of Investment and Management (2026) | TGRS Research Map | TGRS