Event driven strategies are often combined with fundamental and sentiment factors which help us interpret the significance of the event. For example, companies typically will release their earnings once every three months. The dates are scheduled in advance so there are opportunities to make trading decisions both before and after the event. For pre-event trading, we could use analyst sentiment and fundamentals to decide if we expect the earnings release to exceed or fall short of expectations, then we can buy or short before the event. For example, after analyzing financial statements, we may think that the news or analyst sentiment is overly positive and hypothesize that the actual earnings will be less than what’s expected. So this would be a signal to short or sell. For post-event trading, we could determine whether the actual earnings release was better or worse than expected. This is also referred to as an earnings surprise. For example, if the actual earnings were above what was expected based on analyst’s ratings and fundamentals, then this could potentially be a buy signal. We could also combine this with price movements immediately following the earnings release to decide whether other investors considered the event to be positive or negative for the stock price. In other words, we could treat the price movements immediately following an earnings announcement as a measure of investor sentiment towards the stock. To summarize, events in combination with price, volume, sentiment and fundamentals may inform a strategy. One commonly known strategy, which doesn’t work so well anymore because it is very well known, is the post earnings announcement drift. When firms announced earnings, if earnings are above or below expectations, they’re referred to as earning surprises. If we assume an efficient market, we would expect the market price to adjust quickly and stabilize after an earning surprise. However, in reality, is often possible that prices continued drifting in the same direction, upward for a positive surprise or downward for negative surprise for about two months after the event. Even though this factor is well-known and therefore are not as likely to be used to see abnormal returns, it is instructive to study this phenomenon to get some intuition of a market mechanics and behavioral psychology in the markets.