Library About the Earnings Whisper Score
Scoring Expectations to Capture the Earnings Announcement Premium
How the Earnings Whisper Score improves returns ahead of earnings.
Average return, one week before the report through the open following the announcement.
A lot of traders have been taught to sell before earnings.
The logic is understandable. Earnings releases create gap risk, and a bad report can do real damage in one trading session. A UC Berkeley / RS Investments study found that a large percentage of stock crashes are tied to negative earnings announcements and guidance-related events. That is why so many trading rules tell investors to avoid holding through the news.
But that rule misses an important point: earnings are risky, but they are not random.
Trading is about odds, and one of the oldest documented stock market anomalies is that stocks tend to outperform around their earnings announcements. That outperformance is known as the Earnings Announcement Premium, or EAP.
The premium is one of the market's oldest anomalies
The idea goes back to the earliest capital markets research. In 1968, William Beaver showed that earnings announcements contain information investors actually trade on, with abnormal trading volume and return volatility increasing around the announcement week. That same year, Ball and Brown documented the abnormal returns that follow earnings surprises — the Post-Earnings Announcement Drift — and together those two papers helped dismantle the idea that new information gets priced in instantly.
The returns side of the story kept getting confirmed. Chari, Jagannathan, and Ofer found in 1988 that stocks earn abnormally high returns around their earnings announcements. Frazzini and Lamont confirmed in 2006 that the Earnings Announcement Premium still exists — stocks reliably outperform in the weeks they report. And the information content behind it hasn't faded either: Landsman and Maydew revisited Beaver's framework and found that, if anything, the information content of earnings announcements increased over the 1972–1998 period, and Huang and Li found the same abnormal volume and volatility patterns in U.S. firms through 2012.
Our own research has shown the same thing. From the start of 2003 through the summer of 2015, S&P 500 stocks averaged a 21.1% annualized return during the two weeks around their earnings releases, compared with a 14.7% annualized return during the remaining weeks of the quarter. Owning the same stocks, at a different point on the calendar, produced meaningfully different results.
That matters because the Earnings Announcement Premium is not simply the stock's reaction after the number is released. The premium starts before the report. Investors position ahead of the event, expectations shift, analyst revisions move, sentiment changes, and stocks with improving expectations tend to attract buyers before the announcement.
That is the tradable window.
Expectations are what get priced in
We often say that a stock can move higher before a positive earnings release, gap higher on the news, drift higher after the news, or some combination of the three — but very rarely all three. The pre-earnings move is the Earnings Announcement Premium. It is the market pricing in the possibility of positive news before the news is officially released.
That premium exists broadly, but it is not equally distributed. Some stocks deserve a premium. Some do not. Some should probably trade lower into the report.
The academic research points directly at why. In 1999, Bagnoli, Beneish, and Watts published “Whisper Forecasts of Quarterly Earnings per Share” and found that investors can earn economically significant returns in the week before an earnings announcement when whisper forecasts exceed consensus estimates. In other words, the biggest premium goes to the companies the market expects to beat — and expectations, not the consensus number, are what get priced in.
Since that paper, we have collected an enormous amount of expectation data around earnings — Earnings Whisper numbers from thousands of professional analysts and millions of sentiment readings from individual investors. What that data taught us is that not all expectations are the same. A company can be expected to beat estimates but still have weak forward expectations. Another company can be expected to miss the headline number but raise guidance. Some companies have mixed signals that do not create a clear edge.
That is why a simple “buy before earnings” strategy is not enough. The edge comes from separating companies with positive expectation trends from those with weak or neutral setups.
The Earnings Whisper Score
The Earnings Whisper Score ranges from -5 to +5 and is designed to measure the overall expectation setup ahead of earnings. The score combines professional analyst expectations, Earnings Whisper numbers, investor sentiment, and other expectation data to identify whether the stock has favorable or unfavorable odds heading into the report.
The Earnings Whisper number by itself tells us whether the company is expected to beat or miss the consensus earnings estimate. The Score goes further. It helps answer the more important trading question:
Are expectations strong enough to create a tradable premium ahead of the announcement?
And more than a decade of data shows a meaningful difference. From April 2014 through July 2026, measured from roughly one week before the report through the open following the announcement:
Average return, one week before the report through the open following the announcement.
That is a 136-basis-point spread between the highest-scoring and lowest-scoring stocks over the pre-earnings window — and the +5 group captured more than twice the pre-earnings return of the middle group. The win rates tell the same story: 57% of +5 trades finished the window higher, compared with 49% of −5 trades. With over 11 thousand events in the +5 group alone, this is not a handful of outliers. The Score does not eliminate earnings risk, but it does what a good trading signal should do: it improves the odds.
One detail in the chart is worth pausing on. On average, −5 stocks were still slightly higher four days into the window — the entire decline arrived on the earnings gap itself. The market does not price in the bad news ahead of a weak setup; it simply withholds the premium, and the reckoning comes at the open.
Why neutral scores are not enough
One of the most important findings is not just that +5 stocks outperform. It is that neutral and mixed-score stocks do not offer the same edge.
This matters because many investors treat all earnings events as equal. They are not.
A stock reporting earnings next week may have an event catalyst, but an event catalyst is not the same as a favorable setup. If expectations are mixed, sentiment is balanced, analyst forecasts are stale, and the whisper number does not point to meaningful upside, there may be little reason for the market to price in a premium.
That is exactly what the data shows. Stocks with a truly neutral Score — between −1 and +1 — gained just +0.20% over the window across 17,540 events. That is less than half the return of the broader middle group and roughly a fifth of what +5 stocks captured. Their win rate, 51%, was a coin flip.
That is what the Score is designed to identify. It is not trying to predict every earnings reaction. It is trying to isolate where the odds are most favorable before the announcement. In other words, the Score helps answer the question traders actually care about:
Is this earnings event worth trading before the news, or is it just noise?
The edge is in expectations
The Earnings Announcement Premium is fundamentally an expectations premium.
Investors do not buy stocks ahead of earnings because a company is reporting. They buy because they believe the market is underestimating something. That could be earnings, revenue, margins, guidance, demand trends, backlog, pricing, cost control, or management confidence.
The Score is useful because it captures a broader expectation picture than consensus estimates alone. A whisper number above consensus may signal that professional expectations are higher than published estimates. Investor sentiment may show whether individuals are leaning bullish or bearish. Other earnings-related data can help determine whether the setup is positive, negative, or neutral.
That distinction is critical. A company can beat the consensus estimate and still trade lower if expectations were already too high. A company can miss the consensus estimate and trade higher if investors were braced for worse or if guidance improves. Earnings trading is not about the reported number in isolation. It is about the number relative to expectations and the change in expectations before the event.
Capturing the premium without blindly accepting the risk
The most direct way to capture the Earnings Announcement Premium is to buy a high-scoring stock roughly one week before the report and close the position before or at the open following the announcement. That is the window behind the numbers above, and it means the trade never depends on guessing the earnings reaction itself.
For investors who want to reduce some of the event risk, a covered call strategy can also make sense. Earnings announcements often lift implied volatility, which raises option premiums. By buying the stock and selling an out-of-the-money call, a trader can collect premium while still participating in some upside if the stock rises.
The best covered call candidates are not simply high Score names. They are high Score names where the option market is pricing in a larger-than-usual earnings move relative to the stock's own history. That creates an opportunity to sell elevated premium while owning a stock that already has favorable pre-earnings odds.
In July 2015, shares of Apple closed at $123.28 ahead of earnings, and the $127 call expiring three weeks out had a bid of $2.31. Apple had averaged a 4.8% move on earnings over the prior two years, but the options were priced for a 4.9% move. iPhone sales had tracked above expectations during the quarter, professional analysts expected a beat, and the stock carried an Earnings Whisper Score of +5.
If the stock made its typical move higher, the trader captured the equity gain up to $127 plus the $2.31 premium — a total of $6.03 — while the stock needed to fall below $120.97 before the trade lost money. Favorable odds, elevated premium, defined downside.
The obvious tradeoff is that a covered call caps upside if the earnings reaction is much stronger than expected. But for high-scoring stocks where the goal is to capture the pre-earnings premium and reduce downside exposure, the strategy can improve the risk/reward profile. That is why our list of +5 Scores also includes favorable covered call setups based on the Score and current option prices.
The bottom line
The old rule says to avoid earnings because earnings create risk.
That is only half right.
Earnings do create risk, but they also create one of the market's most persistent opportunities. Stocks have historically outperformed around earnings announcements, and that premium can often be captured by positioning ahead of the news.
The key is selectivity. The strongest premium has been concentrated in stocks with the best expectation setup, while the lowest-scoring stocks have failed to capture the premium at all. The Score does not remove earnings risk. It gives traders a better way to decide when that risk is worth taking.
Past performance figures are averages across thousands of earnings events through July 2026, do not reflect transaction costs, and are not a guarantee of future results. Individual outcomes vary.