Quantitative Analysis

Quantitative analysis is a branch of financial analysis that focuses on using data and mathematical techniques to inform investment decisions. Harry Markowitz pioneered modern quantitative analysis with his introduction of Modern Portfolio Theory in the early 1950s.
Frequently Asked Questions
  • What Is the Difference Between Alpha and Beta in Finance?
    Alpha measures how much an investment outperforms or underperforms a benchmark. Beta is a measurement of an investment’s volatility and is one measurement of an investment’s risk.
  • What's the Difference Between an Investment’s Sharpe Ratio and its Treynor Ratio?

    Both ratios exist to try and quantify the risk-adjusted return of an investment. The primary difference between the two is that the Sharpe Ratio measures an investment’s performance against the risk-free rate of return, the Treynor ratio measures it versus equity markets more broadly.

  • How Do You Calculate an Investment’s Beta?

    You calculate the beta of an investment by taking the covariance between the return of a specific investment and broader market return and then dividing that by the variance of broader market returns.

  • What Is a Good Sharpe Ratio?
    A Sharpe Ratio over 1 indicates that an investment has a higher risk-adjusted return than the risk-free rate of return. The higher it is over 1 is how much better a risk-adjusted rate of return it has.

Key Terms

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