Chapter 3 · Section 4 practice

Signal Association and Cross-sectional IC

0 of 5 answered

These questions review the examples in the companion slides. Choose an answer, then check the explanation.

Question 1

What is the sampling unit for the mean of monthly cross-sectional IC?

  • Every trade fill
  • Every cell in the panel
  • One IC per signal date
  • Every stock price since listing

Question 2

Spearman IC requires which inputs?

  • Within-date ranks of both the prediction and the target
  • A ranked target and an unranked prediction
  • A ranked prediction and a future feature
  • Only sector labels

Question 3

What happens to a candidate whose next-month label is pending?

  • Remove it from the prediction universe
  • Retain its prediction and exclude it from realised IC
  • Set its return to zero
  • Copy the previous realised return

Question 4

Does positive sector-relative IC establish sector-neutral portfolio weights?

  • Yes
  • Yes, if rank is used
  • Yes, if ICIR exceeds one
  • No; exposures must be checked on actual holdings

Question 5

A population Pearson correlation is zero. What follows?

  • The variables are independent
  • Neither variable can help predict the other
  • Every nonlinear relationship is absent
  • There is no linear association as measured by covariance, but nonlinear dependence may remain