Inverse post-earnings-announcement drift

This study examines annual post-earnings-announcement reactions in China’s A-share market using the market model-based cumulative abnormal returns (CARs). It reveals an inverse post-earnings-announcement drift (PEAD), where CARs drift opposite to standardized unexpected earnings (SUE) over 60 post-announcement days, with asymmetry between the top and bottom SUE deciles. The inverse PEAD reflects a reversal of pre‑announcement price movements. Compared to the bottom decile, the top decile has higher pre‑announcement target price attainment, a larger proportion of unrealized gains, and stronger post‑announcement selling pressure intensification. The disposition effect amplifies the post‑announcement profit‑taking behaviour in the top decile. Although the bottom decile shows some post‑announcement rebound, its upward drift is limited because poor fundamentals discourage substantial buying. Moreover, financial opacity intensifies the adverse impact of the disposition effect.