Quantitative Analysis

Quantitative Analysis is the application of statistical and mathematical methods in business, especially finance and economics. Those employed in this field are usually quantitative economists. They use data to determine relationships between various economic variables, for the purpose of assisting managers and investors in making decisions regarding resource allocation. The best quantitative analysts are able to provide objective and accurate information about a company's financial situation and its supply chain so that appropriate changes in management strategy can be implemented.

One branch of quantitative analysis that finds its applications in finance is productivity analysis, also called microeconomic forecasting. It utilizes mathematical methods of economic decision-making in order to provide information about the behavior of different firms in relation to their own and other firms in the market. This type of analysis seeks to provide quantitative evidence of the productivity improvements made by firms during a certain period of time as well as how much of this productivity improvement was the result of conscious decisions by managers. The main source of quantitative analysis used in this branch of study is microeconomics, which pertains to the study of individual firms and their internal mechanisms for generating and utilizing productive assets. A popular example of a micro economic indicator is Purchasing Managers Index (PMI) which is calculated from market sales volume over a given period of time.

Another branch of quantitative analysis that finds its applications in finance and economics is statistical arbitrage. When applied to investment securities, this form of quantitative investment management attempts to identify the price differences between different securities that are of similar characteristics. Arbitrage is typically conducted by professional investors who are looking for stock investments that are underpriced. In order to do this, they purchase security that are underpriced and sell them for more than they paid. The practice of statistical arbitrage has lead to the development of sophisticated techniques and formulas used in the analysis of financial markets.

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