Earnings response coefficient

An earnings response coefficient is a measure of how the stock market will respond to a company’s earnings releases. It is usually measured in percentage terms and shows how much the stock price of the company will move for one unit of earnings. For example, if the earnings response coefficient for a company is 10%, then for every dollar the company makes in earnings, its stock price will move up by 10 cents. The higher the earnings response coefficient a company has, the more investors will react to its earnings releases, and will buy more of the company’s stock.