Legal Definitions - indicator

An indicator is a tool used to analyze market performance or economic conditions. It can be an average or index that shows a correlation to market trends or economic conditions. There are different types of indicators, including:

• Coincident indicator: An economic or market-activity index that shows changing trends near the same time that overall conditions begin to change.
• Lagging indicator: An index that indicates a major stock-market change sometime after the change occurs.
• Leading indicator: A quantifiable index that predicts a major stock-market change.
• Economic indicator: A statistical measure used to describe the state of the economy or to predict its direction.

Examples of economic indicators include housing starts, new-home sales, and interest rates. Housing starts and new-home sales are lagging indicators because they tend to respond to the direction of the economy. Interest rates are leading indicators because they tend to predict the future direction of the economy.

For example, if interest rates are low, it may indicate that the economy is growing and people are borrowing more money. On the other hand, if interest rates are high, it may indicate that the economy is slowing down and people are borrowing less money.