InsidersTradesSigma
Quantitative Signals & Scoring
A quantitative measure of the rate at which a signal loses predictive power or relevance over time following the initial event or data release.
The Information Decay Coefficient captures the temporal degradation of signal alpha in insider-trading and quant platforms. When material information becomes public, its informational edge deteriorates as market participants absorb and price the news. This coefficient models this decay function, typically as an exponential or power-law process, allowing scoring systems to discount older signals and prioritize fresher intelligence. High decay coefficients indicate rapid information assimilation, while low coefficients suggest persistent information advantages in less-efficient market segments or with less-aware participant bases.
In insider-activity detection, the Information Decay Coefficient is critical for differentiating between stale and actionable signals. A Form 4 filing released weeks ago carries less weight than recent filing activity, yet derivative positions or option-stack accumulation may have slower decay if institutional crowding lags. The coefficient also interacts with signal persistence metrics and alpha-decay trajectories, forming part of a composite conviction index that weights contemporaneous signals more heavily in portfolio construction and real-time surveillance.