“…Tests for a relationship between E/P ratios and post‐announcement excess returns controlling for SUE are conducted here, using a methodology that differs from that of previous papers investigating joint E/P and SUE effects. In Latane, Joy, and Jones (1970) and Bidwell (1979), a two‐step sort procedure is performed that (1) forms a portfolio of stocks in the upper X percent tail of the SUE distribution, (2) ranks these stocks on E/P, and (3) forms a second portfolio from stocks with the highest E/Ps in the upper X percent SUE tail. If the portfolio formed in step (3) earns higher risk‐adjusted returns than the step (1) portfolio, using the E/P ratio jointly with SUE is said to improve investment performance.…”