This study first establishes a robust link between credit rating and post-earnings-announcement drift (PEAD). I find strong evidence that PEAD is more salient for firms with low credit ratings. This finding is consistent with the notion that investors are prone to underreact to earnings news from low credit rating firms that are characterized by high uncertainty of asset fundamentals. The association between credit rating and PEAD is not driven by traditional information uncertainty proxies such as earnings volatility, cash flow volatility, accruals quality, firm age, idiosyncratic volatility, and analyst forecast dispersion. I further investigate whether transient institutions exploit the differential of PEAD among different rated firms in their arbitrage trades. The results reveal that transient institutions tend to focus their arbitrage on low credit rating firms. However, the existence and concentration of PEAD in low credit rating firms suggest that transient institutions fail to arbitrage away PEAD among low-rated firms and that the arbitrage strategy is riskier than expected by the transient institutions. This in turn implies that estimation risk associated with pricing the earnings news of low-rated firms plays a substantive role in forming the strong PEAD of these firms.

中文翻译：

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信用评级、收益公告后漂移和来自临时机构的套利

这项研究首先建立了信用评级和收益公告后漂移 (PEAD) 之间的强大联系。我发现强有力的证据表明 PEAD 对于信用评级较低的公司更为突出。这一发现与投资者容易对低信用评级公司的盈利消息反应不足的观点一致，这些公司的特点是资产基本面的高度不确定性。信用评级和 PEAD 之间的关联不受传统信息不确定性代理的驱动，例如收益波动、现金流波动、应计质量、公司年龄、特殊波动和分析师预测离散。我进一步研究了临时机构是否在套利交易中利用了不同评级公司之间的 PEAD 差异。结果表明，临时机构倾向于将套利集中在低信用评级公司上。然而，PEAD 在低信用评级公司中的存在和集中表明，瞬态机构未能在低评级公司之间套利 PEAD，并且套利策略的风险高于瞬态机构的预期。这反过来意味着与对低评级公司的盈利消息进行定价相关的估计风险在形成这些公司的强劲 PEAD 方面起着重要作用。