Knowledge center · Factor library
Post-Earnings-Announcement Drift (PEAD)
Stock prices tend to keep drifting in the direction of an earnings surprise for weeks afterward.
Formula
Standardized earnings-surprise percentage, linearly decayed to zero over a fixed post-earnings window
Interpretation
One of the most robust anomalies in the literature: after a large earnings surprise, the market underreacts initially and price keeps drifting in that direction for roughly one to two months.
What good looks like
A recent positive earnings surprise, still within the drift window.
What bad looks like
A recent negative earnings surprise, still within the drift window.
Typical range
Decays linearly to zero by the end of the drift window; capped so a single earnings beat cannot dominate the composite score.
Limitations
Only active for a limited number of days after an earnings report — absent outside that window by design, never estimated. Requires a surprise figure the data vendor may not always supply promptly.
How OmniSignal uses it
One of the most persistent anomalies in the academic literature, decaying in a well-documented, predictable way — which is why the factor is deliberately time-decayed rather than a flat signal.
Where it enters the score
Fundamental family
References
Bernard & Thomas (1989), "Post-Earnings-Announcement Drift: Delayed Price Response or Risk Premium?"
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