Post-Earnings Announcement Drift (SUE)
NO EDGEStocks keep drifting in the direction of a quarterly earnings surprise for about 60 trading days. Bernard and Thomas (1990) trace it to prices acting as if earnings follow a seasonal random walk, ignoring their autocorrelation.
| THE STRATEGY | $SPX BUY & HOLD | |
|---|---|---|
| Growth a year (CAGR) | -2.3% | 12.6% |
| Return per unit of risk (Sharpe) | -0.03 | 0.90 |
| Worst fall (max drawdown) | -61.2% | -24.8% |
// GROWTH OF $1, LOG SCALE
Tested on years it never saw (from the split): -1.4% a year against 12.4% for the benchmark; Sharpe -0.21 in the training years, 0.03 after.
After 25 bps of trading costs: -7.3% a year. WITHIN RANDOM
// DECADE BY DECADE
| ERA | STRATEGY | BENCHMARK |
|---|---|---|
| 2010s | -1.9% | 11.6% |
| 2020s | -3.0% | 14.1% |
// THE IDEA, AS PUBLISHED
Bernard & Thomas (1989, 1990), JAR/JAE · 1989
- SUE = (EPS - EPS four quarters ago - drift) / std dev of past forecast errors
- Sort into deciles using the prior quarter's cutoffs; long top decile, short bottom
- Hold 60 trading days after the announcement
A real computation on the QuantGPT warehouse, survivorship-free, walk-forward. Gross returns, no costs except where stated. Past performance is not a promise. Findings, not advice. COMPUTED 2026-09-24 19:41 ON THE QUANTGPT WAREHOUSE: EVERY DELISTED NAME KEPT, FUNDAMENTALS AS FILED. NOT INVESTMENT ADVICE.