PEAD.txt: Post-Earnings-Announcement Drift Using Text
October 17, 2022
Vitaly Meursault, Federal Reserve Bank of Philadelphia Research Department
Pierre Jinghong Liang, Â鶹¹ÙÍø
Bryan R. Routledge, Â鶹¹ÙÍø
Madeline Marco Scanlon, University of Pittsburgh
We construct a new numerical measure of earnings announcement surprises, standardized unexpected earnings call text (SUE.txt), that does not explicitly incorporate the reported earnings value. SUE.txt generates a text-based post-earnings-announcement drift (PEAD.txt) larger than the classic PEAD. The magnitude of PEAD.txt is considerable even in recent years when the classic PEAD is close to 0. We explore our text-based empirical model to show that the calls’ news content is about details behind the earnings number and the fundamentals of the firm.