Glossary term
Post-Earnings Announcement Drift (PEAD)
The documented tendency of a stock to keep drifting in the direction of an earnings surprise for weeks after the print, rather than repricing instantly to the new information — first documented by Ball and Brown in 1968.
Definition & the Original Study
Efficient-market theory predicts a stock should reprice immediately and fully once an earnings surprise is public. Ball and Brown's 1968 study found the opposite in practice: stocks that beat expectations tended to keep drifting higher for weeks to months afterward, and stocks that missed kept drifting lower — the market's initial reaction systematically under-reacts, and the rest of the adjustment leaks out slowly rather than all at once. This gap between the immediate-efficiency prediction and the observed slow drift is what the literature calls Post-Earnings Announcement Drift.
Why It Persists
Explanations offered over the decades include gradual analyst-estimate revisions after the print, institutional trading frictions that spread buying or selling pressure over time, and investor under-reaction to the information content of a surprise. Whatever the cause, PEAD remains one of the most replicated anomalies in the earnings literature, distinct from the day-of reaction itself.
How Closelook Watches It
Closelook's tape runs a T+5 confirmation check on earnings reactions — comparing the initial move against price action five sessions later to classify a reaction as continuation (drift in the same direction) or reversal (the initial move fading or inverting). This is a descriptive check on how a reaction has evolved, tracked alongside other tape categories such as alpha generation and market regime.