Post earnings announcement drift in PSI20

This paper presents an innovative application of post-earnings announcement drift in the PSI-20 from 2011-2017. We show that abnormal returns exist, and are more significant when we incorporate momentum and liquidity factors for different earnings surprises. Moreover, we implement an investment strategy, including transaction costs, which takes advantage of such abnormal returns. A hedging strategy designed according to the stock’s proximity to 52-week high and earnings surprise yields an info Sharpe of 1.78 and a 65.12% accuracy. Finally, we show that a long-portfolio on PSI-20 equities with a 20-day holding period presents unsatisfactory results when incorporating transaction costs