1. Home
  2. Resources
  3. White papers
  4. Trading the Post-Earnings-Announcement Drift
empty image

Trading the Post-Earnings-Announcement Drift

Access the findings

Trading the Post-Earnings-Announcement Drift using the StarMine Analyst Revisions Model

This research paper combines PEAD signals with the StarMine Analyst Revisions Model (ARM) to represent a more complete picture of the quarterly earnings cycle, to exemplify the value which can be gained by including measures of Post- Earnings-Announcement Drift in an analyst revisions-based strategy.

Access the full report to find out:

  • How insufficient attention to the drift can be explained from a behavioural explanation using Refinitiv MarketPsych’s social media buzz.
  • How to achieve a more complete view of the quarterly earnings cycle to develop a linear model to construct tradable portfolios.
  • How developing a combination model using a PEAD signal within an analyst revisions-based strategy has many complimentary benefits and can outperform the market.
  • "We examine lookback periods of 30 and 75 days from each month end to include earnings surprises into our decile portfolios."
  • "The cumulative decile spread of our full PEAD signal with ARM over our backtest history, produced annualised decile spreads of 8.2% and Sharpe ratios of .72."
  • "Backtested against a 14-year history from 2006 to 2020."
  • "Our ‘full PEAD’ signal with a 30-day lookback generated a Sharpe ratio of .79 compared to the equal-weighted market Sharpe ratio of .49."

Read on - Complete this form to open the full report

By submitting this form, you agree to your personal data being shared within the London Stock Exchange Group of companies (LSEG) for the purpose of receiving communications via post, phone and electronic means from LSEG about events, resources, products, and/or services.

For more information on how LSEG uses your data, see our Privacy Statement. You can adjust your preferences at any time through the preference link in any electronic communication that you receive from us.
When investors are not paying sufficient attention to the earnings announcement, they miss the opportunity to react quickly and thus the share price incorporates the information from the surprise more slowly over time.

Nathaniel Meixler
Senior Quantitative Research Analyst, StarMine