Investor Glossary-leading indicatorInvestor Glossary-leading indicatorInvestor Glossary-leading indicatorInvestor Glossary-leading indicatorInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Leading Indicator

The HTML to link to this page
 

A leading indicator is a statistic that predicts trends in the economy or a particular industry. For example, the number of building permits issued is a leading indicator for the housing sector, because permits must be obtained before building begins. A move in a leading indicator for one time period is often not meaningful; but a string of increases or decreases, especially in conjunction with confirming data, points to a recovery or downturn. Because stock market prices are determined by the likelihood of future events, a leading indicator is a key tool for market analysts. Using a leading indicator is difficult, however. First, a leading indicator sometimes gives false signals -- it may not indicate a change in anything. Second, the lag time between the signal given by a leading indicator and the actual change in the economy or industry is often uncertain. And third, a leading indicator is only truly useful to an analyst when its signal is at least somewhat ambiguous. Once a leading indicator provides certain evidence of a trend, stock prices will already reflect that information.



Rate this leading indicator definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: in escrow, wholly-owned subsidiary, risk management, phantom income, class C shares, deferred tax, minority interest, 1031 exchange, command economy, stock market close, VIX, 144a, average price per share, cancelled check, deferred revenue, 401a, 1035 exchange, EBITDA, required rate of return, debt service coverage, option premium, current ratio, margin rate, open position, limit order, reverse mortgage, FICO score, Zero Cost Collar, covered put, ex-dividend, FTSE, real GDP, liquidity ratio, LIBOR, labor relations, balance sheet, implied volatility, Key Rate Duration, irrevocable trust, diluted share, quality assurance, retained earnings, stock split, inflation, APR, ex-dividend date, dividends payable, annual return, per diem


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use