Several studies examined reasons for the earnings drift following earnings announcements
and found that unexpected earnings explained more than 80 percent of the subsequent stock price
drift for the total time period. Several authors who reviewed the prior studies contended that the
reason for the stock price drift was the earnings revisions that followed the earnings surprises
and contributed to the positive correlations of prices.
In summary, these results indicate that the market has not adjusted stock prices to reflect the
release of quarterly earnings surprises as fast as expected by the semistrong EMH, which implies
that earnings surprises and earnings revisions can be used to predict returns for individual stocks.
These results are evidence against the EMH.8
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