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Home >> Estimate Analytics >> Zacks Price Response Indicator
Predict relative stock price performance with better accuracy over the next 10 days.
BACKGROUND
A basic tenet in Investments is that a company's current value is equal to the company's future
earnings discounted to the present. Academic studies show that any positive or
negative earnings announcement directly affects the share price. The question
is, after the earnings announcement and the stock makes a sudden movement up or
down has there been an over-reaction or under-reaction to that new earnings news.
PERFORMANCE
Zacks PRI is a scoring system that identifies stocks after they have
reported earnings whose returns are expected to outperform the market over the
next 3-10 days. The model scores stocks from A to E. The scoring system
correlates the percent surprise and short term price reaction preceding an
announcement and the short-term price response following the announcement.
HOW YOU CAN USE ZACKS PRI
The Zacks PRI optimal time horizon is 3-10 days; consequently many
institutional investors' use the model for more of a timing tool for better buy
and sell decision around the earnings announcement rather than a method of
picking long term out performers.
For instance, the more common uses of The Zacks PRI include:
• Decision tool to buy a stock immediately following good earnings news or waiting to buy into the stock after some profit taking.
• Decision tool to sell a stock immediately following bad earnings news or waiting to sell the stock after bottom fishing is completed. Screening for new purchase candidates
Where can I find the PRI?
• The PRI appears on the top of the Estimate page and also is the centerpiece of the PRI report.
• The PRI report is displayed on the zackgo.com site based on which of the companies in your portfolio will report on a specific day.
• The objective of the PRI report is to provide all of the info Zacks has to help you predict price responses immediately following eps reports.
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