Information Coefficient - IC

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

BREAKING DOWN '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. Analyst

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

    A financial professional who studies various industries and companies, ...
  3. Forecasting

    The use of historic data to determine the direction of future ...
  4. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  5. Correlation

    In the world of finance, a statistical measure of how two securities ...
  6. Correlation Coefficient

    A measure that determines the degree to which two variable's ...
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. Fundamental Analysis

    5 Basic Financial Ratios And What They Reveal

    Understanding financial ratios can help investors pick strong stocks and build wealth. Here are five to know.
  8. Investing

    What Investors Need to Know About Returns in 2016

    Last year wasn’t a great one for investors seeking solid returns, so here are three things we believe all investors need to know about returns in 2016.
  9. Economics

    The Basics Of Business Forecasting

    Whether business forecasts pertain to finances, growth, or raw materials, it’s important to remember that a forecast is little more than an informed guess.
  10. Economics

    Forces Behind Interest Rates

    Interest is a cost for one party, and income for another. Regardless of the perspective, interest rates are always changing.
RELATED FAQS
  1. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  2. What is the difference between positive and normative economics?

    Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Full Answer >>
  3. Do plane tickets get cheaper closer to the date of departure?

    The price of flights usually increases one month prior to the date of departure. Flights are usually cheapest between three ... Read Full Answer >>
  4. Is Colombia an emerging market economy?

    Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >>
  5. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  6. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center