Companies that report bad news earnings surprises tend to have an upward drift in stock returns before the actual earnings announcement date followed by a sharp decrease in stock returns at the announcement date.

Bad News Earnings Surprises

Occur when a company reports lower earnings than market analysts' expectations, often leading to a negative reaction in the stock market.

Stock Returns

The gain or loss on a stock investment, typically expressed as a percentage of the investment's initial cost.

Earnings Announcement Date

The specific date on which a company publicly releases its financial performance for a specific period, usually quarterly or annually.