In economics, quantitative analysis is the analysis that uses mathematical and statistical techniques to explain or predict different economic variables. Apply these techniques using economic theory as the basis.
Quantitative analysis uses econometrics as the main work tool . The reason why quantitative analysis is used is the need to measure, evaluate or assess economic reality from a point of view as objective as possible.
For example, we can argue that a country’s GDP will grow thanks to an increase in investment and an expansive fiscal policy. According to economic theory, if investment increases and taxes are reduced, a country must grow. However, in economics nothing is certain. After all, it is a social science. So, taking into account the inevitable uncertainty, quantitative analysts try to study how exactly these events will affect according to their amount. Another use of quantitative analysis is to demonstrate economic theories.
In recent years, thanks to the great development of technology, the available databases as well as computer programs that facilitate this type of calculation have increased. Therefore, the use of this type of analysis is becoming more frequent. However, quantitative analysis even if it is mathematical is not infallible and much less perfect. It is essential to understand the economic environment and understand that there are many variables that cannot be measured. Hence, many data are only estimates.
Stock market quantitative analysis
Quantitative analysis is applied in different sectors of the economy. Companies that want to quantify the satisfaction of their customers, banks that use models to control their risks and governments that make predictions to implement various policies. One of the areas in which quantitative analysis is most used is in the area of stock market investment . This type of discipline is also known as quantitative trading. Stock market reality can be analyzed from different premiums. One of these premiums is the quantitative analysis. An example of quantitative techniques to operate in the stock market are the following: