The Resurgence of Post-Earnings Announcement Drift: Insights from Post-2020 U.S. Equity Markets

Sammanfattning

This study challenges the prevailing view that the Post-Earnings Announcement Drift (PEAD) anomaly has steadily diminished in modern U.S. equity markets. Instead, it suggests a resurgence since 2020, particularly among large-cap stocks. Analyzing data from 220,228 quarterly earnings announcements across 6,958 U.S. listed firms between 2005 and 2024, we observe that the average 60-day drift for large-cap equities appears to have increased by approximately 280% post-2020, yielding annualized returns exceeding 8% from a zero-cost hedge portfolio. Motivated by post-pandemic structural shifts, such as increased retail investor participation and the dominance of passive investment strategies, we explore whether these ownership changes contribute to PEAD resurgence. Although both retail and passive ownership show a positive correlation with PEAD, they do not seem to fully explain the intensified drift post-2020. Our findings suggest that broader structural changes in trading behavior, technology adoption, and information dissemination mechanisms likely drive these renewed market inefficiencies. This study contributes to ongoing discussions in the asset pricing and market efficiency literature, highlighting the dynamic and cyclical nature of market anomalies. It underscores the necessity of revisiting asset pricing models and efficiency frameworks in response to evolving market conditions shaped by investor demographics and technological advancements.