What is QA (Quantitative Analysis)?
Quantitative Analysis (QA) Definition
Quantitative Analysis is a technique by which an analyst relies on mathematical and statistical calculations, figures, and models to garner specific data.
Quantitative analysts aim to use mathematics to represent a given reality or predict an outcome.
Common Metrics Used in Quantitative Analysis
In the world of finances, many common metrics rely on quantitative analysis.
Some examples of quantitative metrics are:
The Purpose of Quantitative Analysis
The purpose of quantitative analysis is to provide an objective prediction of reality.
Quantitative metrics are used by all kinds of financial entities for a variety of purposes; by investors to estimate the benefit or risk of an investment, by governments to model economic policies, and by companies to evaluate the performance of their products, just to name a few.
Quantitative vs Qualitative
Quantitative analysis is often used in conjunction with qualitative analysis, which focuses on ascribing meaning to the numbers used in quantitative analysis.
Things like customer perception and company reputation are examples of qualitative variables.
Examples of Quantitative Analysis
For example, say that Company A manufactures luxury watches.
If they wish to improve their profit margins, they may wish to source cheaper materials; instead of gold and silver faces, for example, they may want to switch to brass and aluminum.
While this would decrease the cost of manufacturing, it won’t necessarily achieve Company A’s goal.
Customers that expect watches of the utmost quality may not wish to buy from Company A anymore if they feel that they have “cheapened”their products.
Therefore Company A must use both quantitative and qualitative analysis to determine the optimal strategy for manufacturing and pricing to achieve their desired margin.