EPS and Revenue Surprises: over 25% per year Hedge Return

Jagadeesh and Livnat (2006) sort stocks based on both the EPS surprise and the Revenue Surprise and find that, over the 4 month period following the earnings report, the hedge portfolio based on EPS surprises earns size adjusted return of 5.5%, the

portfolio based on Revenue Surprises earns 4.4% and that the combo portfolio earns 8.1%, which translates into 25% per year size adjusted hedge return.

Both EPS and Revenue Surprises are data items that are available in Zacks’ Research Wizard and can be used to simulate portfolios. Please click here to learn more about the screening and backtesting power of a stock research system built for the individual investor.

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