Thursday, September 20, 2012

Improving Investment Decisions with Quant Analysis

Below are some excerpts on a SeekingAlpha article -- that highlights "the application of quant analyses to produce meaningful and objective investment information."  

With so much at stake in the finance and investment world, there are constant debates about investment performance, asset allocation, active vs. passive approaches, and more. In this article, we review recent articles on the application of quantitative models to the investment world - and look at the stock market's technical outlook.
History can tell us where we have been -- and a scientific and mathematical approach can help guide our investment decisions going forward. Quantitative analytics can be applied to many areas within finance, ranging from asset allocation and risk management to trading / investment strategies and the growing interest in alternative assets.

Quantitative approaches can be used to improve investment decisions by producing objective analysis. The goal is to improve investment results and the probability of repeatability. Math and scientific methods can help put history and patterns on our side. Here are some important takeaways:
  • Varied interests and motivations can reduce optimal investment decisions.
  • Performance data is not necessarily useful in predicting future results, especially when studying short-term manager performance.
  • Behavioral finance has shown that many investors overreact to recent events, and tend to ignore long-term historical patterns.
  • Mathematical models can minimize the negative impacts of greed and fear, improving discipline -- and taking emotion out of the equation.
  • Robust quantitative analysis can improve "forward information" and repeatability.
Systematic and scientific approaches can yield meaningful information and help improve long-term performance by providing objective analysis to investment committees.

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