Jump On The Post-Earnings Announcement Drift
Financial Analysts Journal
post-earnings announcement drift; positive-jump stocks; hedge portfolio; portfolio management
Finance and Financial Management | Portfolio and Security Analysis
The authors examined the potential profitability of a strategy that exploits the post-earnings announcement drifts contingent on jump dynamics identified in stock prices around earnings announcements. With long positions in positive-jump stocks and short positions in negative-jump stocks, their hedge portfolio achieved an annualized abnormal return of 15.3% and an annualized Sharpe ratio of 1.52 over the last four decades. Neither conventional risk factors nor common company characteristics explain the abnormal return.
Zhou, H. & Zhu, H.Q. (2012). Jump on the post-earnings announcement drift. Financial Analysts Journal, 68(3), 63-80. doi: 10.2469/faj.v68.n3.7