It has long been documented that stock prices tend to act differently surrounding earnings announcements. The post-earnings announcement drift is the phenomenon that a stock’s cumulative abnormal returns tend to drift in the direction of a recent earnings surprise for several weeks or even months following a public earnings announcement. That is, the estimated abnormal returns continue to drift up after the release of earnings reports with positive forecast errors, and drift down after the release of earnings reports with negative forecast errors. Furthermore, there is evidence that the magnitude of the drift is correlated with the magnitude of the earnings surprise.
