quantitative analysis

A business or financial analysis technique that seeks to understand behavior by using complex mathematical and statistical modeling, measurement and research. By assigning a numerical value to variables, quantitative analysts try to replicate reality mathematically.

Quantitative analysis can be done for a number of reasons such as measurement, performance evaluation or valuation of a financial instrument. It can also be used to predict real world events such as changes in a share price.

In broad terms, quantitative analysis is simply a way of measuring things. Examples of quantitative analysis include everything from simple financial ratios such as earning per share, to something as complicated as discounted cash flow, or option pricing.

Although quantitative analysis is a powerful tool for evaluating investments, it rarely tells a complete story without the help of its opposite-qualitative analysis. In financial circles, quantitative analysts are affectionately referred to as “quants”, “quant jockeys” or “rocket scientists”.

When a securities analyst focuses on a corporation’s financial data in order to project potential future performance, the process is called quantitative analysis.

The methodology involves looking at profit-and-loss statements, sales and earnings histories, and the statistical state of the economy rather than at more subjective factors such as management experience, employee attitudes, and brand recognition.

While some people feel that quantitative analysis by itself gives an incomplete picture of a company’s prospects, advocates tend to believe that numbers tell the whole story.