Cramer Bounce


DEFINITION of 'Cramer Bounce'

The sudden overnight appreciation of a stock's price after it has been recommended by Jim Cramer on his CNBC show, "Mad Money". This increase in price can be attributed to investors who buy stocks after seeing Cramer's recommendations.

BREAKING DOWN 'Cramer Bounce'

This effect is fairly significant in certain classes of stock. For example, one study entitled Is the Market Mad? Evidence from Mad Money released by Northwestern University in March of 2006 showed that for smaller stocks, the overnight increase can be more than 5%.

This abnormal increase lasts for only about 12 days, whereupon the stock's price retreats back to its pre-recommended price, assuming no other news has been released.

This is one instance in which it can be argued that irrational investors have a significant effect on a stock's price.

  1. Buy And Homework

    A buzz word coined by Jim Cramer based on the idea that "buy ...
  2. Stock Pick

    A situation in which an analyst or investor uses a systematic ...
  3. Appreciation

    An increase in the value of an asset over time. The increase ...
  4. Sell

    The process of liquidating an asset in exchange for cash. The ...
  5. Analyst

    A financial professional who has expertise in evaluating investments ...
  6. Buy

    1. A recommendation to purchase a specific security. A buy rating ...
Related Articles
  1. Insurance

    What You Need To Know About Financial Analysts

    Thinking about relying on analyst recommendations for your next trade? We'll show you what to watch out for.
  2. Investing Basics

    What Is The Impact Of Research On Stock Prices?

    The answer to this question is directly related to the importance of information in the marketplace.
  3. Brokers

    Choosing An Advisor: Wall Street Vs. Main Street

    A high-profile brand name alone won't meet your personal investing needs. This article will show you what else to look for.
  4. Active Trading Fundamentals

    Mad Money ... Mad Market?

    Jim Cramer's spirited recommendations are a case study in irrational market behavior.
  5. Mutual Funds & ETFs

    Top Schwab Funds for Retirement

    These Schwab funds are strategically designed and have performed well on a historical basis, meaning they're solid options for retirement.
  6. Mutual Funds & ETFs

    American Funds' Top Funds for Retirement

    Planning for retirement in this economic and investment environment is far from easy. American Funds might offer an answer.
  7. Mutual Funds & ETFs

    ETF Fees: Why BlackRock is the Latest to Cut Them

    Low expense ratios are a big selling point for ETFs, but are they being focused on too much?
  8. Financial Advisors

    Vanguard's Target Date Funds: What You Should Know

    Target date funds have grown in popularity as an investment of choice among 401(k) investors. Here's a closer look at Vanguard's offerings.
  9. Mutual Funds & ETFs

    Zeroing in on Fidelity’s Top Funds for Retirement

    Fidelity's retirement funds might offer long-term potential, but perhaps a better opportunity is available.
  10. Fundamental Analysis

    An Overview of Janus Capital Management

    A look at Janus Capital and the funds it manages.
  1. How do mutual funds split?

    Mutual funds split in the same way that individual stocks split, but less often. Like a stock split, mutual fund splits do ... Read Full Answer >>
  2. What are the biggest risks associated with covered interest arbitrage?

    Covered interest arbitrage is when an investor buys into foreign currency that has an interest rate that will yield the investor ... Read Full Answer >>
  3. How does price elasticity affect my stock purchase decisions?

    The person who handles a corporation's short-term investments varies depending on the size of the company, the corporate ... Read Full Answer >>
  4. Why are the tangible assets of a company important to investors?

    A financial forecast is an estimation or projection of likely future income or revenue and expenses, while a financial plan ... Read Full Answer >>
  5. Which financial instruments have par values?

    Short-term investments can include a number of possible investment vehicles. Marketable equity securities are just one of ... Read Full Answer >>
  6. How does days to cover a short position relate to a short squeeze?

    Days to cover a short position reveals the intensity and duration of a potential short squeeze. A short squeeze occurs when ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  4. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  5. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  6. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
Trading Center