factor · PEAD
PEAD — Post-Earnings Announcement Drift — bets that stocks which beat earnings keep drifting upward for 30 to 90 days after the print, and stocks that miss keep drifting down. The market under-reacts to the surprise; the drift fills in the gap.
When a company reports earnings, three things happen on day zero: a price gap, a flood of analyst notes, and an institutional rebalance. But the rebalance does not finish on day zero — index funds wait for the next rebalance window, mutual funds wait for the next manager meeting, retail investors wait for next month's brokerage email. Each wave of buying (or selling) stretches over weeks. PEAD measures how many waves are likely still ahead, given how big the surprise was, how confident analysts seem about the new trajectory, and how much trading has already happened.
inputs · standardised earnings surprise (SUE)
· post-announcement analyst revisions
· whether the price gap has held vs reversed
· time elapsed since the announcement
ideas · large surprises drift further than small ones
· drift fades exponentially as days pass
· sustained analyst-revision flow extends the drift window
· gap-persistence weeds out reversed prints
output · cross-sectional standardised scorePEAD has a fading half-life — fresh prints carry the most signal, prints from a few months ago carry essentially none. The exact decay rate, drift window, and blend weights between SUE / revisions / gap-persistence are calibrated against historical drift profiles and are not disclosed. Public anchors: Bernard-Thomas 1989 (the original PEAD), Foster-Olsen-Shevlin 1984 (SUE construction).
Earnings calendar comes from Finnhub plus SEC EDGAR 8-K filings. SUE is computed nightly when an announcement enters the database; analyst revisions arrive on a 4-hour cadence. The factor lives in apex_factor_scores keyed by ticker and date, with values restricted to the 90-day post-announcement window — outside that window the factor returns a neutral 50 so it does not muddy the composite. Fresh prints (days 1-15) carry the highest weight; the signal anneals away as drift completes.
PEAD interacts strongly with Momentum (a beat is the kind of news that creates the under-reaction Jegadeesh-Titman exploit) and with NLP MD&A tone — when management's narrative in the same 10-Q is upbeat, the drift extends further (Tetlock 2007's mechanism). When PEAD fires bullish AND momentum is rising AND NLP tone is positive, the EARNINGS MOMENTUM CASCADE confluence pattern triggers. Conversely, a SUE beat with bearish NLP tone fires the EARNINGS DISSONANCE pattern — the print was good but management is hedging.
PEAD's drift profile breaks during macro-driven sell-offs (March 2020, October 2022) — a beat in a falling market doesn't drift, it gets dragged down with the index. We mitigate via the regime amplifier: in risk-off regimes PEAD's weight halves automatically. Second failure: the 'whisper' problem. When unofficial analyst targets diverge sharply from the published consensus, the published SUE understates the actual surprise, and the drift starts before our signal recognises it. We do not currently incorporate whisper data — that's a known gap.
Every ticker page shows the per-factor decomposition. The PEAD score is one of thirteen composing the 0–100 the composite score.