Information Coefficient - IC

AAA

DEFINITION of 'Information Coefficient - IC'

A correlation value that measures the relationship between a variable's predicted and actual values. The information coefficient is a performance measure used for evaluating the forecasting skill of financial analysts

INVESTOPEDIA EXPLAINS 'Information Coefficient - IC'

The information coefficient follows the same measurement rules of correlation. Scoring ranges on a scale from 0 to +1, where the latter shows a strong linear relationship between the predicted and actual values. Analysts with an IC score near +1 exhibit great skill in forecasting. A score close to 0 reveals that the analyst is a poor forecaster.

RELATED TERMS
  1. Correlation Coefficient

    A measure that determines the degree to which two variable's ...
  2. Correlation

    In the world of finance, a statistical measure of how two securities ...
  3. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  4. Forecasting

    The use of historic data to determine the direction of future ...
  5. Analyst

    A financial professional who has expertise in evaluating investments ...
  6. Security Analyst

    A financial professional who studies various industries and companies, ...
Related Articles
  1. Fundamental Analysis

    Great Expectations: Forecasting Sales Growth

    Predicting sales growth can be something of a black art, unless you ask the right questions.
  2. Bonds & Fixed Income

    Is Your Portfolio Beating Its Benchmark?

    Compare portfolio manager performance using the information ratio.
  3. Investing

    Analyst Forecasts Spell Disaster For Some Stocks

    The type of stock that analysts cover can heavily influence their predictions.
  4. Economics

    Earnings Forecasts: A Primer

    Learn how this key metric is calculated and how it is used to judge market performance.
  5. Mutual Funds & ETFs

    Pick The Winners At The Mutual Fund Track!

    For both mutual funds and racehorses, there's no surefire way to pick a winner.
  6. Mutual Funds & ETFs

    Morningstar's Stewardship Grade Scores Big

    Morningstar's service gives investors an idea how well fund companies are safeguarding their interests.
  7. Investing

    How to Use Stratified Random Sampling

    Stratified random sampling is a technique best used with a sample population easily broken into distinct subgroups. Samples are then taken from each subgroup based on the ratio of the subgroup’s ...
  8. Economics

    How A Limited Government Affects A Country's Finances

    Countries with limited governments have fewer laws about what individuals and businesses can and can’t do. What's the net result?
  9. Fundamental Analysis

    Lognormal and Normal Distribution

    When and why do you use lognormal distribution or normal distribution for analyzing securities? Lognormal for stocks, normal for portfolio returns.
  10. Investing Basics

    How Does Goodwill Affect Financial Statements?

    Goodwill is a bit of a paradox--intangible, yet it is recorded as an asset on the purchasing company's balance sheet.

You May Also Like

Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  3. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  4. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  5. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  6. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
Trading Center