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What is meant by drifts with respect to the stock market?

Personal Finance & Money Asked on December 4, 2020

A lot of websites had specific types of drifts explained like post-announcement drift but I couldn’t find a standard definition or explanation.

2 Answers

I think that what you are referring to is Post-Earnings Announcement Drift (PEAD) which is movement in the direction of the earnings announcement after the release. IOW, when a company reports better than expected earnings, share price will drift upward for a few weeks afterward and downward after poor earnings.

Answered by Bob Baerker on December 4, 2020

Drift simply means steady, gradual movement of some measure, usually towards an equilibrium. The alternative would be a jump, such as where a stock price moves suddenly to an equilibrium price in reaction to something (news, other economic factors, etc.). A drift is more gradual, with the equilibrium being reached over a longer period of time.

There are many types of drifts as you mention, and not all refer to price. "Style drift" is where a mutual fund shifts gradually away from an investment style or objective, for example.

The key is that it's a gradual change rather than a sudden change.

Answered by D Stanley on December 4, 2020

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