What is Quantitative Analysis?
Quantitative Analysis is a new research methodology that is gaining popularity. It involves the use of complex mathematical models and statistical tools to value stocks or other assets based on multiple parameters simultaneously.
Quant analysts account for fundamental factors like financial ratios and earnings projections, and technical factors like the stock’s past trading behaviour and price momentum. Other model inputs include macro-economic data and risk measures.
An advantage of this method is that it supports the concurrent evaluation of a broad universe of stocks. However, defective inputs can lead to wrong conclusions. It is also computation-intensive and requires mathematical expertise. No wonder then that it is used primarily by hedge funds!