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Item 5 02 Management Change Drift

Updated eventData needs: lowlong only
paper
2001
Source
Huson, M., Parrino, R., Starks, L. (2001). "Internal Monitoring Mechanisms and CEO Turnover: A Long-Term Perspective." Journal of Finance 56(6), 2265-2297. Bushman, R., Smith, A., Zhang, F. (2011). "Investment Cash Flow Sensitivities Really Reflect Related Investment Decisions." Journal of Accounting Research.
Read the paper →

In plain terms

When an 8-K announces a director or officer change (Item 5.02), the market typically rerates the firm over the next 1-6 months. Long for 30 to 180 days.

How it works

8-K Item 5.02 (Departure/Appointment of Directors or Officers) flags a management change. Forced CEO/CFO turnover (post-underperformance) is followed by positive multi-quarter drift as the market re-rates the firm under new leadership. Routine retirements are noise; the harness sorts the two with random-shuffle permutation + cost stress.

Live results

11 times picked on its own · 19 times inside a blend (19 beat the stock) · updated 2026-06-06
This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 19 such blended picks (19 of which beat simply holding the stock). Picking it on its own is only one of the ways it shows up.
How its picks scored vs. buy & hold
Each pick is graded on a recent year it was never tuned on, against simply owning the same stock
Where its edge concentrates
Share of picks in each company-size group that beat buy & hold
How often it trades
Active vs. patient. Bars on the left mean it waits for rare setups; bars on the right mean it trades often
Return vs. buy & hold
How much each pick beat or trailed simply owning the stock over the test year (extreme microcap moves trimmed)
Loading substrate evidence…

Data dependencies

  • Daily prices

    Adjusted-close OHLCV for every US-listed ticker; primary price feed.

  • SEC 8k events

    Item-coded 8-K events (1.01 material agreements, 4.02 non-reliance, etc.).

Expected edge

Reported return
+5 to +8% over 6-12mo
Tested over
T+1 to T+180d

Huson-Parrino-Starks 2001; +5 to +8% over 6-12mo on forced turnover subset.

Related families

Explore Item 5 02 Management Change Drift on alphactor.ai

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For informational and educational purposes only. Not financial advice. Learn more