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Does Earnings-Surprise (SUE / PEAD) actually work?

OVERSOLD

Works, but nothing like as well as it is sold.

The claim

Stocks that beat earnings drift higher for weeks (post-earnings drift) — Academic (Bernard-Thomas)

What we did

Tested against Equal-weight survivorship-free peer universe + SPY, net of cost, 2003–2026, OOS ≥ 2021.

The result

Result: -3.7 net-αSPY %/yr (beats index net of cost)

vPEERS +2.9 (real skill) but net-αSPY −3.7%/yr after cost

Verdict

Genuine stock-picking skill over peers — but the drift gets eaten by trading costs. Real effect, not a tradeable edge net of friction.

What the test did and did not do

survivorship-free universe
net of real costs
tested out of sample
point-in-time data
checked for look-ahead

Almost nobody publishing a backtest says which of these they did. We list the ones we failed as well as the ones we passed.

Tested 2026-06-23. The same treatment, applied to every other system, is on the test bench.

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Written with AI assistance from our own test database. The numbers are computed, not composed.
General market commentary for education, not personalised investment advice. Backtested results are hypothetical. Trading carries a real risk of loss.