This study empirically examines whether cost stickiness and cost variability (i) are recognized by investors in forming their earnings expectations, and, (ii) influence the speed of incorporating information on earnings surprises into stock prices. Findings indicate that the market earnings expectations are upward biased for firms with high sticky costs and downward biased for firms with high anti-sticky costs, suggesting a systematic bias induced by partial comprehension of cost stickiness. Consequently, cost stickiness slows down the incorporation of earnings surprises into stock prices, substantially exacerbating the widely documented PEAD anomaly. In contrast, implications of cost variability are recognized by investors to a reasonable extent