We show that actively managed U.S. hedge funds, on average, trade on the post-earnings announcement drift anomaly more aggressively than mutual funds. Both mutual and hedge funds that actively trade on drift anomaly face higher arbitrage risk. However arbitrage risk reduces mutual funds'...

This analysis identifies a distinct immediate announcement period negative relation between earnings announcement surprises and aggregate market returns. Such a relation implies that market participants use earnings information in forming expectations about expected aggregate discount rates and,...