Abstract
Post-earnings announcement drift (PEAD) displays presidential cycles: it earns 1.8% per year during Democratic presidencies but its profitability increases significantly to 21.2% per year during Republican presidencies. The stronger price underreaction likely arises from the aggressive expectation of potential tax cuts during Republican presidencies. Investors react less to unfavorable (favorable) earnings news from firms with high expected tax liabilities (credits), as these firms are perceived to benefit (lose) from the tax cuts. We provide survey evidence that supports this explanation.
| Original language | English |
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| Number of pages | 57 |
| Publication status | Published - 29 Jun 2025 |
| Event | 2025 China International Conference in Finance - Shenzhen, China Duration: 29 Jun 2025 → 2 Jul 2025 https://www.cicfconf.org/cicf-home (Conference website) |
Conference
| Conference | 2025 China International Conference in Finance |
|---|---|
| Abbreviated title | CICF |
| Country/Territory | China |
| City | Shenzhen |
| Period | 29/06/25 → 2/07/25 |
| Internet address |
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User-Defined Keywords
- post-earnings announcement drift
- presidential cycles
- Republicans
- Democrats
- underreaction
- mispricing
- earnings surprises
- subjective expectation
- tax policy
