Earnings response coefficient(redirected from Earnings Response Coefficients)
Earnings response coefficient
A measure of relation of stock returns to earnings surprises around the time of corporate earnings announcements.
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Earnings Response Coefficient
The relationship between a change in a company's stock price and any unusual statements in a company's earnings announcement. Unexpectedly high earnings can create a buying panic and while low earnings can create a selling panic. This can drive the stock price up or down. Arbitrageurs use the earnings response coefficient to estimate how much the price may change and make decisions on how to exploit the pricing inefficiency. See also: Capital Asset Pricing Model, Arbitrage.
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