Trading Earnings When the News Moves Much Faster Than Before

Portfolio Strategy Research 4 August 2026 | 5:05PM AEST

Trading Earnings When the News Moves Much Faster Than Before

n Recent reporting seasons have seen a significant increase in earnings-day price Matthew Ross | moves. The largest Beats/Misses have produced an average result-day return of Goldman Sachs Australia Pty Ltd 10-12pp this decade, a 50% increase on the historical average. A number of explanations have been put forward. One side argues the market has become less efficient over time, so ‘surprises’ are genuinely larger than they were — pointing to the rise of passive investment, declining sell-side coverage, and tighter disclosure rules. The other argues the market is now more efficient: increased hedge-fund activity and the shift toward AI and quant trading has meant news is simply being incorporated into share prices faster than before. n Our findings suggest the market has become somewhat more efficient over time — prices adjust more quickly post-results making the simple, predictable drift smaller than it once was — yet significant opportunities to trade around earnings remain. In this recent era of heightened earnings-day volatility, a simple long-short strategy of trading ‘Beats’ vs ‘Misses’ in the month following results has generated 2.5% alpha, around half the 4.9% averaged over the prior period. If we accept that earnings-day moves are larger today in part because the market more quickly incorporates news that once took 1-2 months, roughly half the increase in the volatility around earnings is still unexplained. n Focusing on the aspects of a result that the market typically misses can still generate strong returns. We show that significant alpha is still available by trading only those Beats where 1) positioning was bearish, 2) sentiment was already starting to turn, 3) the result points to an inflection in earnings momentum and quality, and 4) the market didn’t pay enough attention on the day (i.e., peak result days, limited intraday price action). Notably, cash flow based signals tend to predict ongoing drift more than headline earnings, suggesting the market tends to overlook them on the day. This approach has generated strong long-short alpha in the current environment (c.7% per result season), and should be a key focus for investors heading into the upcoming season, given the large shifts in valuation dispersion (Growth multiples -40% to new post-Covid lows) and the record levels of short interest. We flag the stocks where stretched positioning and shifting sentiment make them more likely to deliver an outsized move around earnings.

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Trading earnings when the news moves much faster than before We analyse over 6,500 earnings announcements by ASX 300 Industrial firms over the past 20 years. On average, stocks outperform by 20bps on their result day — a modest risk premium for holding into the print. In the early 2000s, the typical result-day range was +/-3.5pp; in the post-Covid period it has nearly doubled to +/-6.5pp for the average stock. Looking at the companies that deliver the largest surprise on the day (i.e., top/bottom quartile movers) the average result-day move has jumped to 10-12pp this decade, a 50% increase on the historical average.

Exhibit 1: The largest Beats/Misses have produced an average result-day return of 10-12pp this decade, a 50% increase on the historical average Average result day move for the largest Beats/Misses each reporting season: Top/Bottom Quartile

-15 1H2007 2H2007 1H2008 2H2008 1H2009 2H2009 1H2010 2H2010 1H2011 2H2011 1H2012 2H2012 1H2013 2H2013 1H2014 2H2014 1H2015 2H2015 1H2016 2H2016 1H2017 2H2017 1H2018 2H2018 1H2019 2H2019 1H2020 2H2020 1H2021 2H2021 1H2022 2H2022 1H2023 2H2023 1H2024 2H2024 1H2025 2H2025 1H2026

Source: Goldman Sachs Global Investment Research, FactSet

To test how Post Earnings Announcement Drift (PEAD) has changed over time, we examine how stocks trade in the month following their result. We define ‘Beats’/’Misses’ as stocks that…