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Quantitative analysis refers to the use of mathematical computations to analyze markets and investments. People who prefer to invest based on quantitative analysis are often referred to as “quants” or “quant jockeys.”

Analysts who perform quantitative analysis use various mathematical methods such a probability, game theory, statistics and calculus.  Whatever method is used, the goal is to develop a mathematical model that replicates real world behavior and results. 

Investors use these models to evaluate different types of investment opportunities.  Portfolio managers use quantitative analysis to minimize risk and maximize returns on large portfolios.  Traders often use quantitative analysis to determine the best time to buy and sell securities, options and commodities.  Other investors use it to find underpriced securities to purchase and hold before the rest of the market discovers the investment opportunity. 

Examples of quantitative analysis are calculations to determine net present value, break-even points, earnings per share and other types of investment ratios such as the debt-to-equity ratio.  Algorithmic trading and portfolio stress testing are also types of quantitative analysis. 

While quantitative analysis can be very good at evaluating and even predicting investment strategies and decisions, prudent investors also rely on more qualitative means of analysis, which involves using their personal experience, judgment, and even intuition to make investment decisions. 

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