# How to obtain annualized IR from t-monthly IC?

When we checking the relation between some factors and Stock price, we could use Information Coefficient(IC) to meausre.

And then I already have t-monthly IC for each factor, and I need to calculate the annualized Information Ratio(IR).

I think the formula should be

Annual_IR = (AVG(IC) / t) / (STD(IC) * SQRT(12/t))


However, I read a sample code with a difference. What I am confused about is that he multiplies another 12 after the calculation above.

Thank you for any help!

• Please provide some more context. What is your definition of IC? Which model are you trying to build? – AdB Apr 10 '19 at 7:11

$$Information\ Ratio\ =\ \frac{Ann.\ Excess\ Returns}{Ann.\ Tracking\ Error}\\ \\ Ann.\ Tracking\ Error\ =Annualized\ \sigma ( Excess\ Returns)$$