Quantitative Analysis (QA)
What Is Quantitative Analysis (QA)?
Quantitative analysis (QA) is a technique that uses mathematical and statistical modeling, measurement, and research to understand behavior. Quantitative analysts represent a given reality in terms of a numerical value. Quantitative analysis is applied to the measurement, performance evaluation, valuation of a financial instrument, and predicting real-world events, for example, changes in a country's gross domestic product (GDP).
Understanding Quantitative Analysis (QA)
Quantitative analysis provides analysts with apparatuses to examine and analyze past, current, and anticipated future events. Any subject including numbers can be quantified; consequently, QA is used in many fields including logical chemistry, financial analysis, social science, and organized sports. In the financial world, analysts who rely rigorously on QA are frequently referred to as "quants" or "quant jockeys."
Governments rely on QA to make monetary and other economic policy decisions. As a component of QA, governments and central banks commonly track and evaluate statistical data, for example, GDP and employment figures.
In the financial services industry, QA is used to analyze investment opportunities, for example, when to purchase or sell securities. Investors perform QA when utilizing key financial ratios, like the price-earnings ratio (P/E) or earnings per share (EPS), in their investment decision-production process (e.g., whether to purchasing shares of a company's stock). QA ranges from the examination of simple statistical data (e.g., revenue) to complex computations (e.g., discounted cash flow or option pricing).
Quantitative Analysis Versus Qualitative Analysis
While QA serves as a useful evaluation instrument, it is often combined with the complementary research and evaluation device qualitative analysis. It is common for a company to use quantitative analysis to evaluate figures like sales revenue, profit edges, or return on assets (ROA).
However, to get a better picture of a company's performance, analysts likewise evaluate data that isn't easily quantifiable or reduced to numeric values, like reputation or employee morale. Qualitative analysis focuses on meanings, involves sensitivity to context rather than the desire to get universal generalizations, and establishes rich descriptions rather than quantifiable metrics. Qualitative analysis seeks to answer the "why" and "how" of human behavior.
In a combined qualitative and quantitative analysis project, a company, analyst, or investor could wish to evaluate the strength of a product. Qualitative instruments used for the project can include customer surveys and panel conversations. A quantitative analysis of the product can likewise be initiated through the examination of data regarding numbers of repeat customers, customer complaints, and the number of warranty claims over a given period.
QA isn't the opposite of qualitative analysis; they are just different philosophies. Used together, they provide useful data for informed decisions that promote a better society, improve financial positions, and enhance business operations.
Features
- Quantitative analysis (QA) is a technique uses mathematical and statistical modeling, measurement, and research that to understand behavior.
- Quantitative analysis is used for the evaluation of a financial instrument and predicting real-world events like changes in GDP.
- Quantitative presents reality in terms of a numerical value.
