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Explaining the Decline of PEAD: More Arbitrage or Less News?

Laura Griffin et al.

Journal of Accounting Auditing and Finance2026https://doi.org/10.1177/0148558x261439734article
AJG 3ABDC A
Weight
0.50

What the paper says

Post-earnings-announcement drift (PEAD) has declined significantly over time. The prevailing explanation for this decline from prior work is an increase in arbitraging activities. We propose a new explanation based on a decline in the informativeness of current earnings news in predicting future earnings news (“signal informativeness”). We show that declining signal informativeness, particularly for smaller firms, plays a much more important role in the decline of PEAD than increasing arbitrage trading. In fact, when we account for declining signal informativeness alone, the downward trend in PEAD is no longer significant. Finally, we find that an increasing prevalence of firms with volatile earnings contributes most to declining signal informativeness, with the rise of special items playing a relatively minor role.

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https://doi.org/https://doi.org/10.1177/0148558x261439734

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@article{laura2026,
  title        = {{Explaining the Decline of PEAD: More Arbitrage or Less News?}},
  author       = {Laura Griffin et al.},
  journal      = {Journal of Accounting Auditing and Finance},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1177/0148558x261439734},
}

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.