Quantitative Analysis

Quantitative analysis is attempting to use mathematical or statistical techniques to determine a business’s or security’s current situation and future prospects. These techniques can range from simple to sophisticated.

Quantitative analysis may help an investor understand an investment better, but it may not tell much about the investment’s future prospects. Buffett initally bought stocks which were selling at very cheap valuations but some of them didn’t do too well because their future prospects were limited.

Quantitative analysis also faces the problem of getting accurate data, because garbage input gets garbage output. Numbers on a financial statement may not accurately reflect the business’s operation due to manipulation etc. Nevertheless, quantitative analysis is popular and a useful tool, perhaps more effectively when combined with qualitative analysis as well.

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