Quantitative research
An approach to studying companies or markets built on statistical and numerical methods — time series, regression and econometrics — rather than reading qualitative business factors.
In plain language
Fundamental research usually mixes numbers with judgement. An analyst reads a balance sheet. But an analyst also judges management and brand.
Some analysts try to strip the judgement out. That is quantitative research. It looks for financial and operating metrics that act as a leading indicator of how a company will perform. It uses statistical tools instead of a qualitative read of the business.
How it works
The workbook: "At the simplest level, time series analysis and regression of historical data can help extrapolate future earnings. Quantitative analysts may use more sophisticated econometric approaches to refine their output." A simple regression run over 8 quarters of past data, for instance, can project a growth rate forward.
It also names quantitative research's biggest limitation directly: "applying pure econometric approach in fundamental analysis suffers from some major limitations" because accounting standards and business models change over time, making past data less comparable with the present. The workbook's own conclusion is blunt: "pure quantitative research is not often employed in fundamental analysis" on its own.
A worked example
Illustrative. A quantitative analyst regresses a company's quarterly earnings per share over the past eight quarters and finds a consistent 9% year-on-year growth trend. Applying that trend to a current EPS of Rs 38.5 projects next year's EPS at roughly Rs 42 (38.5 × 1.09 ≈ 41.97).
That projection says nothing about why the company grows — a change in accounting policy, a one-off gain, or a new competitor entering the market could all break the trend without the regression ever seeing it coming.
Why NISM asks about it
Chapter 4.5 (Quantitative Research) and 4.6 (Behavioural Approach) set quantitative research alongside the qualitative and behavioural approaches. Expect a question testing the workbook's own limitation of quantitative research — changing accounting standards and business models reducing comparability.
Common exam traps
- The workbook does not treat quantitative research as a replacement for qualitative analysis — its own conclusion is that pure quantitative research is rarely used alone in fundamental analysis, precisely because of the comparability limitation.
Where this is taught
Free preparation for NISM Series XVRelated terms
- Fundamental analysisEstimating what a share is worth from the profits and cash flows the business will generate, then buying only when the market price sits below that estimate.
- Primary researchFirst-hand information an analyst gathers directly — plant visits, and conversations with customers, suppliers or employees — rather than sourced from published reports.
- Secondary researchInformation an analyst gathers from already-published sources — annual reports, industry journals and market research — rather than collecting it first-hand.
- Technical analysisForecasting price direction from past price and volume alone, on the assumption that everything worth knowing about a company is already in its price.