PEAD — Post-Earnings Announcement Drift — is the empirical pattern that stocks which beat their earnings consensus keep drifting upward for 30 to 90 trading days after the announcement, while stocks that miss keep drifting down. The market under-reacts to the surprise; the drift fills in the gap as institutional flow catches up.
Bernard-Thomas 1989 documented that stocks under-react to earnings surprises — the price moves on the day, but more drift continues for 60+ days. We measure standardized unexpected earnings (SUE) and recent earnings revisions to capture this. PEAD is one of the longest-standing anomalies in finance, persistent through decades of arbitrage attention.