Keeping It Simple: How Post-earnings Return Drift Can Exist and Not Exist Simultaneously

Some authors use 18 quadrillion regressions to conclude that post-earnings announcement drift (PEAD) is a major factor in the stock market. Some other authors find strong evidence of PEAD with t-statistics exceeding 14. However, at least one author argues that earnings drift does not exist in equities. This paper tries to resolve this conflict by replicating the procedure to generate the earnings drift factor, and indeed finds that earnings drift does not exist in all but microcaps. It stands to reason that for the bulk of market capitalization, there is no earnings drift. It is also shown that some conclusions relating to the significance of PEAD arise from using non-standard methods and interpretations.