Getting Even : Contrarian Investment and Event Returns on Earnings Announcements

Earnings announcement event returns are significantly positive (negative) for loser(winner) stocks. Postevent drift is stronger for earnings surprises running counter totrends associated with stocks' classification as prior winners/losers or value/growth.These results are in accordance with predictions derived from an integrated model ofinvestor over- and underreaction. However they are neither inconsistent with a theory ofrational multifactor pricing, which is rather mute on the issue of earnings announcementreturns.