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Finance GlossaryQuantitative Analysis
Quantitative Analysis
Definition of Quantitative Analysis
Quantitative analysis (QA) is the application of mathematical and statistical modeling, measurement, and research to understand and predict behavior in the financial markets. Quantitative analysts use complex mathematical models and algorithms to analyse trading opportunities, manage risk, and execute trades using large amounts of historical data and computational power, rather than qualitative factors such as management experience and company reputation.
Related Terms
Volume Weighted Average Price (VWAP)
VWAP is a trading benchmark that calculates the average price of a security weighted by trading volume throughout the day. Institutional traders often compare execution prices to VWAP; buying below VWAP suggests efficient trade execution, while prices above it may indicate higher-than-average transaction costs.
Relative Strength Index (RSI)
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements on a scale of 0-100. Readings above 70 signal overbought conditions, suggesting potential reversals, while below 30 indicates oversold levels. Traders use 14-period RSI to identify entry/exit points and confirm trends in stocks or indices.
Shares Outstanding
Shares outstanding is the overall number of shares of a company that investors are currently holding. These shares are presently held by promoters, institutions, and the public. The number of shares outstanding is used to calculate important metrics like market capitalisation and earnings per share. When there’s a change in this number, it can impact the prices of stocks and investor valuations.
Capital Growth
Capital growth is the profits an investment generates on the principal amount. Since the capital grows on earning profits, the term capital growth is also used to describe the overall corpus of an individual (principal + profits).
Zero-Sum Game
A zero-sum game is a situation where one participant’s gain is exactly equal to another’s loss. In certain short-term trading scenarios, such as derivatives trading before costs, profits earned by one trader come directly from losses incurred by another, making the net outcome zero.
Equity Share Capital
The total amount of money that is raised by a company through the issuance of shares is known as equity share capital. Shares issued could be classified as common or preferred shares, both of which are a part of the equity share capital.
In general, share capital is known to be the money raised by issuing shares. Companies have the option of raising more equity share capital by issuing additional shares through a Follow on Public Offer (FPO) or other financing methods.
In general, share capital is known to be the money raised by issuing shares. Companies have the option of raising more equity share capital by issuing additional shares through a Follow on Public Offer (FPO) or other financing methods.
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