This paper examines the relationship between unexpected earnings components (i.e., unexpected operating and non-operating income) and post-earnings- announcement drift to determine whether both components contribute to the mispricing phenomenon. I find that both operating and non-operating income surprises explain the marketís underweighting of earnings surprises. However, the contribution of operating income surprises is significantly higher than non-operating income surprises. While the mispricing of components appears to be captured by post-earnings-announcement drift, the speed of price responses to unexpected non-operating income is faster than for unexpected operating income. Moreover, unexpected operating and non-operating income mispricing are distinct mispricing phenomena, and a joint hedge portfolio trading strategy generates excess abnormal returns when based only on an unexpected operating or non-operating strategy.
ISSN: 1792-6599 (Online)