Post-earnings announcement drift and the dissemination of predictable information / Discussion / Comment

This study develops a model to infer the degree to which the information in an earnings announcement is incorporated into investors' expectations for the subsequent earnings announcement at any point in time between the 2 announcements. Results suggest that as information about future earnings that could have been discerned from earlier announcements is disseminated in a more transparent form, investors revise their earnings expectations to reflect this information. Investors' expectations appear to incorporate more and more of the serial correlation in earnings surprises as the quarter progresses, even though they do not consider per se the serial correlation in earnings surprises in forming their expectations.