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Medium · backtesting · Quant Researcher interview question · backtesting, spearman, information-coefficient, signal-decay, ranking
Rank Information Coefficient (IC) decay quantifies how quickly a signal's predictive power diminishes over successive time periods, a critical analysis for determining optimal holding periods in systematic strategies. It is calculated using Spearman rank correlation, an outlier-resistant metric that assesses the monotonic relationship between a signal and future returns. This analysis forms the empirical basis for signal weighting and alpha decay modeling in quantitative equity research. Task I