What Is ICIR?

ICIR, short for information-coefficient information ratio, measures the stability of an information coefficient (IC) through time. It is normally calculated as the mean periodic IC divided by the standard deviation of periodic ICs. Some practitioners annualise the ratio by multiplying by the square root of the number of periods per year; reports should state the convention used.

A higher ICIR indicates that predictive skill has been more consistent, not merely higher on average. It should not be interpreted as a formal significance test without considering sample size, serial dependence from overlapping forward returns, and the number of signals or models tried.

See also

• Information coefficient (IC)

• Rank IC

• Out-of-sample testing

Research and literature

• Richard C. Grinold, The Fundamental Law of Active Management, The Journal of Portfolio Management 15(3), 1989.