Post-Earnings Announcement Drift Strategy with Surprise and Price Confirmation
Summary
This strategy trades post-earnings announcement drift by pairing an earnings-per-share surprise with the stock’s price reaction. It calculates the surprise relative to the absolute analyst estimate and considers reports significant when the surprise meets a configurable threshold, set by default at 5%. A long requires a positive surprise and a sufficiently positive price move; optional shorts require a negative surprise and a sufficiently negative move. The user can evaluate the reaction on the earnings bar or wait for the next daily bar, and positions close after a configurable holding period, defaulting to 60 bars.
The accompanying explanation attributes drift to gradual institutional portfolio adjustments and describes a roughly 60-trading-day continuation, while the script itself does not present a backtest period or performance results. It also does not define a stop-loss, and its usefulness depends on reliable earnings actuals and estimates and on how the selected chart bars align with report timing. The suggested holding duration is a parameter and should not be read as proof of a persistent effect in every stock or market regime.
Key ideas
- The strategy measures EPS surprise against the absolute analyst estimate and filters for a minimum magnitude.
- Long and optional short entries require the price reaction to agree with the earnings surprise.
- Reaction confirmation can use either the earnings bar or the next daily bar.
- Positions close after a configurable number of bars, with a default holding period of 60 bars.
- The document offers an institutional-adjustment explanation for drift but provides no strategy performance results or stop-loss rule.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.