Quantitative Analysis (abbreviated "QA") is a scientific technique that involves mathematical and statistical measurement, modelling and research to explain certain behaviours. In Quantitative Analysis, analysts usually use numerical values to express a reality. Quantitative analysis is used for various things, such as evaluating performance, predicting real events and valuing financial instruments. For example, it can be used to predict future changes in a country's gross domestic product (GDP).
In financial research, QA aims to evaluate a profitable investment opportunity and estimate any change in micro- and macroeconomic value. In this way, investors and managers can use this information in decision-making.
What does quantitative analysis involve?
QA provides analysts with important tools to examine and analyse all events in the past, present and near future. Anything that involves numbers can be quantified. Therefore, QA can be used in various fields such as financial analysis, analytical chemistry, organised sports and social sciences. Analysts who rely mainly on QA are called quants or quant jockeys. Even governments rely on this type of analysis to make economic policy decisions. They do this by monitoring and evaluating statistical data such as employment figures and GDP.
In the financial industry, analysts use QA to analyse different investment opportunities and so it helps investors make their final decision. For example, QA can be used to analyse when is the right time to buy or sell securities.
Qualitative analysis involves the study of simple statistical data and complex calculations, e.g. the calculation of option valuations.
For real events, this analysis involves quantifying trends in patterns and strategies with the aim of identifying the correlation between different variables. There are several forms of quantitative analysis, but the most common are the following:
- Cost-benefit analysis
- Statistical analysis
- Contribution margin accounting
- Feasibility study
Conclusion
This method has already been adopted by many people, including hedge fund managers. It is advanced, which is due to the development and advances in computer technology. However big the difference between quantitative and qualitative analysis, most analysts use both methods. Quantitative analysis is heavily based on mathematics and is widely used as a stand-alone approach. However, in certain circumstances it is used in conjunction with Qualitative Analysis. Quantitative Analysis is used to identify potential investments and then Qualitative Analysis helps to find the perfect investment. QA also plays a major role in risk management. This form of analysis has its proponents in the real world, in companies and governments.
