Post-earnings announcement drift (PEAD) is a well-documented and puzzlingly persistent market anomaly. Companies that report earnings higher than expected typically experience an upward drift in their stock prices while those that report earnings below what was anticipated see a downward drift.
In a recent paper, we offer a new explanation for this anomaly based on the trading behavior of corporate executives and directors in the days after an earnings announcement. We distinguish between contrarian and confirmatory corporate insider trades after the earnings announcement. Contrarian trades occur in the opposite direction to the response of share prices after a surprise in … Read more