In this session, we begin our discussion of trading based upon public information by looking at earnings reports. Since markets react to the news in earnings reports, we begin by categorizing that news into good, neutral and bad, by comparing the actual earnings to the predicted earnings. Not only do we see a price change that is consistent with the nature and magnitude of the surprise (positive price changes on positive surprises) but we also see two other phenomena. The first is that prices start to drift in the direction of the surprise even before the earnings report is made public (suggesting that someone is trading illegally ahead of the report) and that they continue to drift in the same direction after the report comes out (suggesting a slow learning market). We also look at earnings reports that are delayed and find that they are more likely to contain bad news. Finally, we look at the speed of price reaction on the day of the report and find that prices adjust quickly to earnings surprises, suggesting that any investment strategy built around earnings surprises has to be built around speedy trading/execution.