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The speed and path of adjustment in stocks to the degree of earnings surprise in their quarterly announcements are studied using price‐volume transactions data. A differential price‐adjustmentp rocess was observed,w ith stocks having large,p ositive earnings surprises experiencing a faster adjustment compared with those stocks with negative earnings surprises. Volume, transaction frequency, and size were found to be directly related to the absolute degree of surprise,b ut very favorablee arnings‐surprises tocks experienced initially a large number of smaller trades while stocks with large unfavorable earnings surprises had relatively fewer transactions but higher volume per trade.

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