Post–earnings-announcement drift

Ok, imagine that you have a lemonade stand and you sell lemonade to your friends. Every day, you open your stand and sell lemonade for 50 cents a cup. One day, you have a really good day and sell a lot of lemonade. Your mom comes to you and tells you that you made $10 today. That's more than you usually make in a day!

Now, because you had such a good day, you think you can sell your lemonade for more money. So, the next day, you decide to sell your lemonade for 75 cents a cup. But your friends don't want to buy lemonade from you anymore because it's too expensive!

This is kind of like what happens with stocks when a company announces that it made more money than people thought it would (this is called an earnings announcement). People get really excited and start buying the stock, thinking that this means the company is doing really well.

But after a few days, investors start to realize that just because a company made more money one time, it doesn't mean it will keep making more money in the future. So, the stock price goes back down. This is called post-earnings-announcement drift.

So, just like how your friends stopped buying your lemonade when it got too expensive, investors stop buying a stock when they realize it's not worth as much as they originally thought.