From The Editor. Issue 10: Post Earnings Announcement Drift

Trading earnings announcements, in theory and in practice.

If you see a cockroach on your kitchen floor, it is a common belief that there are probably several more lurking in your cupboards. What we actually observe is really just the tip of the iceberg. This “cockroach theory” applies to stock market investments as well. Earnings downgrades, for example, are rarely “one-off” events. More often than not they are followed by subsequent downgrades.

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