What is a quantitative analysis?
Quantitative analysis is used, for example, to explain relationships or behaviors through statistical modeling, measurement and research. It attempts to represent a given reality in the form of a numerical value. The collection of numerical data therefore makes it possible to measure the frequency of an event and thus provides an insight into real-life circumstances. Quantitative analysis can therefore be used, for example, to measure, evaluate performance, value financial instruments and predict events (e.g. for exchange rate forecasts).
Areas of application of quantitative analysis
Quantitative analysis is used in many fields, such as analytical chemistry, financial analysis, social sciences and organized sports. In the financial world, analysts who deal exclusively with quantitative analysis are often referred to as “quants”.
Governments use quantitative analysis to make monetary and other economic policy decisions. As part of quantitative analysis, governments and central banks typically track and evaluate statistical data, such as GDP and employment figures.
In the financial services industry, quantitative analysis is used to analyze investment opportunities. For example, it serves as a basis for deciding whether securities should be bought, held or sold. For example, the price/earnings ratio (P/E ratio) or earnings per share (EPS) can be calculated. More complex calculations include, for example, the valuation of companies using various valuation models such as discounted cash flow.
Quantitative analysis and qualitative analysis
While quantitative analysis is a useful assessment tool, it is often combined with the complementary research and assessment tool of qualitative analysis. To get a better picture of a company’s performance, analysts also evaluate information that is difficult to quantify, such as management reputation or employee morale. Qualitative analyses often require a high level of expert knowledge. A good asset manager can therefore provide you with the best possible advice by combining qualitative and quantitative analysis.