Post Earnings Announcement Operations (PEAD) is an effect that shows that shares that respond positively to the day the quarterly figures are presented, often continue to rise over the next few weeks, and the opposite to a negative reaction.

Quarterly figures provide updated information on the basics of a company. This can have a major impact on the share price and we therefore often see the largest movements in a share price when the quarterly figures are presented.

Statistics show that stocks generally do slightly better than the rest of the market in the month they submit figures, but there are thus big differences: some stocks rise a lot and others fall a lot after quarterly figures.

Unfortunately, how a stock will react to quarterly figures is not possible to predict, but it turns out that shares that rise on the day the company submits numbers, on average continue to outperform the rest of the market over the next few days and weeks. Shares that fall on the day the company submits figures continue to outperform the rest of the market in the days and weeks ahead.

The reason for this initial under-reaction is usually explained by behavioral finance, or investor behavior: for investors who have taken the risk of sitting above quarterly figures, it is often too tempting to make a profit. This leads to a relative overweight of salespeople on a day of price hikes. Consequently, the positive news is not fully priced in right away and the stock continues to rise in the days and weeks ahead. Quarterly figures leading to a fall in prices on the first day after publication have the opposite effect: investors do not like to make losses and would rather postpone the sale or hope that the stock will turn up again. This leads to a relative underweight of sellers on a day of price declines. The negative news is thus not fully priced in right away and the stock continues to fall in the days and weeks ahead.