The interaction between value and PEAD is discussed in a paper by Yan and Zhao. PEAD is one of the most researched anomalies in the last 4 decades since its discovery by Ball and Brown. Value stocks outperform following positive earnings and positive market reaction to earnings (EAR):
Excess returns are almost 3% a quarter, since 1984, in addition to the segment return (i.e. total return of 8% per quarter or 36% annually!). This paper does not control for magnitude of earnings surprise. However, Chordia and Shivakumar show that returns increase with SUE (standardized unexpected earnings):
Therefore there may be opportunity to further improve on Yan and Zhao’s results by sorting on SUE.