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Experiments on the Post-Earnings-Announcement Drift


Funding source: Austrian Science Fund (FWF), project number P 32124-G27
Funding amount: € 159,590.34
Duration: 05/2019-04/2023

Project team

Stefan Palan (principal investigator)
Erik Theissen (project member)
Josef Fink (PhD student, project member)


Stock prices tend to adjust slowly to the information contained in earnings announcements. After a positive (negative) earnings surprise (defined as the difference between actual and expected earnings), stock prices tend to drift upward (downward) for up to one year. This phenomenon is referred to as the post-earnings-announcement drift (PEAD).
This project's main contribution to research into PEAD is the use of laboratory experiments. In three separate papers, the project will investigate (1) the most prominent explanation from the literature for why PEAD occurs - earnings autocorrelation, (2) whether limits to arbitrage prevent the elimination of PEAD, and (3) how share prices adjust to the information contained in the announcements, and how institutional features of the market, details of trader behavior and the timing of the earnings announcement affect the adjustment of prices.

Further information

Academic abstract (German version)