Prior research suggests that the earnings expectations of some investors are systematically biased toward seasonal random walk (SRW) predictions. We provide clear and direct evidence that the net buying activity of small (large) traders around earnings announcements is significantly positively associated with SRW (analyst) forecast errors. Further, the interpretations of earnings news by the smallest and largest investors appear to be completely unrelated. Finally, small trades at the time of

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... rnings announcements run counter to stock-price movements suggesting that small traders may impede stock prices from reflecting earnings-related information and may, therefore, play a role in post-earnings-announcement drift. Abstract: Prior research suggests that the earnings expectations of some investors are systematically biased toward seasonal random walk (SRW) predictions. We provide clear and direct evidence that the net buying activity of small (large) traders around earnings announcements is significantly positively associated with SRW (analyst) forecast errors. Further, the interpretations of earnings news by the smallest and largest investors appear to be completely unrelated. Finally, small trades at the time of earnings announcements run counter to stock-price movements suggesting that small traders may impede stock prices from reflecting earnings-related information and may, therefore, play a role in post-earnings-announcement drift.