I show how a post-announcement drift can be generated in a model with fully rational investors who interpret public information differently. Differential interpretation of information transforms public raw information into private interpreted information. If investors recognize their limited...

Abstract We study the interrelation among the post-earnings announcement drift (PEAD) and momentum short-term anomalies, and the reversal long-term anomaly. Some theories argue that PEAD and momentum are a consequence of underreaction to new information on the market. One theory in particular,...