Quantitative Analysis

Categories: Trading, Charts

Next time some banal store clerk tosses a "Hey, how ya doin'?" at you, throw this one back at them:

"I slept 7.3 hours last night, which trended 3% worse than normal. My stock portfolio is up 1.2% this morning, so that's good. I impressed my boss with my last earnings forecast, which proved to be 3.2% pessimistic, meaning that our company is doing a bit better than even we had thought. And when I stepped on the scale this morning, I discovered that I had lost 1.7 pounds, pre-dumping. So I'd say that I'm doing quite well, thank you."

So that's quantitative analysis of a day, or a moment in life. Apply the same thing to stocks and bonds and other securities. If investors only do quantitative analysis and no actual, um, thinking, they usually get led astray, or at least into bad markets or bad market cycles or bad turns one way or another. The data that they analyze, from revenue growth to margin analysis to units shipped in x many locations, is usually incomplete, if not inaccurate. But if they are only doing quant analysis, then all the qualitative factors (factors which actually comprise the then-wrong-numbers) get ignored. Which leads to problems down the road.

Bad decisions depress investors who get quantiatively poorer, and then they need a different kind of analysis. The kind with a long couch.

Related or Semi-related Video

Finance: What is a quant fund?0 Views

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Finance a la shmoop. What is a quant fund?

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Oooo, algorithms.... Say it with me people algorithm, math, black boxes, spooky [Equations flying around]

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numbers a quant fund is an investment fund

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well usually hedged or with elements of hedging that relies solely on the math [Definition of a quant fund]

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of everything. They don't care much that toothpaste is now being used for crow's [Man putting toothpaste of his face]

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feet abatement and that there's a five-year bullish trend for Colgate they

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don't care that Tesla is dominating the world with electric cars and that [Tesla logos popping up all over the world]

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gasoline will likely be obsolete in a few decades and they don't care that

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people are living longer so life insurance companies have a tailwind [Life insurance sail boat going fast]

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behind them too because insurees will be paying those premiums 17 more months

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on average in the future before they croak. Well all quant funds care about is [People handing over money before they disappear]

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the math of the math, typically a quant fund builds its own proprietary complex

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math laden models which automatically trigger a series of trades at any given [Equations flying around]

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moment in the trading day hoping to benefit even in tiny ways from what are

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essentially arbitrage opportunities or theoretically riskless trades that can [Definition of arbitrage]

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be made taking advantage of mixed pricing in the market all around the

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world. Quant funds as they are now classified as an alternative investment

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in the same vein as hedge funds charge the same exorbitant fee structure and [High fee structure label on quant funds]

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because they do such vast volumes of trading that is something like one-third [Stocks being moved around]

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of all u.s. stock trades now derive from quant fund managers well they give out

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massive commissions and have equally massive sway with the brokerage

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community to you know say nice things about them and encourage people to talk [Newspaper article about quant funds]

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about how great quant funds are yeah and you've probably seen myriad ads on TV [Woman watching TV]

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for their funds you know like this one math it does a body good.. [Dwayne Johnson on the advert]

Find other enlightening terms in Shmoop Finance Genius Bar(f)