How to Develop

Quantitative Analysis Model

By Group 2
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 WHAT IS A QUANTITATIVE
ANALYSIS MODEL?

Quantitative Analysis Model is a scientific approach to managerial decision making whereby

raw data are processed and manipulated resulting in meaningful information.

Quantitative Meaningful
Raw Data Analysis Information

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3
THE IMPORTANCE OF QUANTITATIVE
ANALYSIS MODELS

Provides Objective Allows us to make data-driven decisions that are based

Insights on facts rather than opinions

We can better understand the data trends and make

Helps Identify Outliers
more accurate predictions based on the data.

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THE IMPORTANCE OF QUANTITATIVE
ANALYSIS MODELS

Enables Predictive Allows us to make informed decisions about sales

Modeling forecasting, customer behavior, and inventory
management

We can compare data from different sources and

Provides a Basis for
identify similarities and differences between them
Comparison

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APPLICATIONS OF QUANTITATIVE
ANALYSIS MODELS

Analyzes past performance data and risk factors to

Portfolio Optimization
recommend a mix of investments that aligns with risk
tolerance and goals

Customer Lifetime Analyzes customer purchase history to predict their

Value (CLV) Prediction future value, helping businesses prioritize customer
retention efforts

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APPLICATIONS OF QUANTITATIVE
ANALYSIS MODELS

Analyzes sales data and predict future demand,

Supply Chain
allowing businesses to optimize inventory levels and
Optimization
avoid stockouts or overstocking

Football teams use quantitative models to analyze

player performance data and make informed decisions
Sports Analytics
about player selection and game strategies

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Identifying the Research Question or
Business Problem

Starting the Characteristics of a Good

Inquiry Research Question
Identify areas of interest and refine Specificity,Measurability, Achievability,
focus. Relevance.

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Identifying the Research Question or
Business Problem

Techniques for Developing a Benefits of a Well-Defined

Research Question Research Question
Clear Direction, Focused Data
5W1H Framework, Literature Review Collection , Enhanced Analysis and
IImproved communication .

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 From Question to The Power of SMART
Objectives Objectives
Break down the research ques Specific, Measurable, Attainable,
Into specific, measurable objec- Relevant and Time-bound

Setting Measurable Objectives tives

Benefits of Measurable
Objectives

Enhanced Clarity, Focused Efforts,

Improved Evaluation, Increased
Motivation

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Data Collection
Types of Data Considerations
Methods and Primary Data(Surveys, Interviews, Relevance, Timeliness, Accuracy,

Considerations
Experiments, Focus groups), Completeness and Ethical considerations
Secondary Data (Industry Reports,
Government Databases) etc

Data collection tools Challenges in Data

Collection
Survey Software, DBMS, Web Data Availability, Data Quality,
Scraping Tools, Data Analytics Cost, Ethical Considerations, Time
Platforms. Constraints.

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 Hypothesis Testing Regression Analysis
T-tests, Chi-square tests, Analysis of Identify relationships between

Choosing Appropriate Variance (ANOVA) dependant & independent variables

Quantitative Techniques

Forecasting Other Techniques

Techniques
Moving averages, Exponential Correlation Analysis, Factor Ana
smoothing, Time series analysis. lysis, Cluster Analysis.

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 CHOOSING APPROPRIATE
QUANTITATIVE TECHNIQUES

Choosing the Right Type of Data, Number of Variables, Research Question

Technique

Microsoft Excel, Google Sheets, R, Python, SAS,

Software Tools
SPSS

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DATA PREPROCESSING AND CLEANING

Data preprocessing involves transforming raw data

Data Preprocessing
into a format that is suitable for analysis

Data cleaning involves identifying and correcting

Data Cleaning
errors or inconsistencies in the data

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 Normalization Handling Missing
Values
• Normalize data to bring features • Decide between imputation
to a similar scale. or deletion strategies for
Data processing • 𝑥normalized=𝑥−𝜇𝜎​ where μ missing values.
and 𝜎 are mean and standard
deviation respectively

Feature
Selection/Extracti
onools
• Identify and retain relevant
features for analysis,
removing redundancies. 15
 Outlier Detection and Noise Reduction
Removal
• Identify and remove data points • Reduce random fluctuations
significantly differing from the obscuring patterns.
• Techniques: Smoothing,
Data Cleaning rest.
• Enhance accuracy by filtering.
Techniques eliminating outliers.

Error Correction

• Identify and correct errors in

data entry or measurement.
• Ensure data integrity for
reliable analysis.
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 Model Specification

Model specification in quantitative analysis involves determining the mathematical form and
structure of the model we will use to analyze our data.we can approach model
specification for two common techniques: regression analysis and time series analysis.

Regression Analysis

Regression analysis is a powerful tool for understanding and forecasting based on the
relationship between variables. It allows you to predict a dependent variable based on the
values of one or more independent variables. This concept is notably employed across
various fields, such as finance, medicine, and environmental science, for making informed
decisions.
 Real-Life Cases of Regression Analysis:

One prominent example is the use of regression analysis in predicting house prices. By
considering factors such as location, size, and number of bedrooms, analysts can predict a
house's sale price. This is particularly useful for real estate agents and buyers seeking to
determine fair market values.

Time Series Analysis

• Models of Time Series Analysis:
⚬ Additive model.
⚬ Multiplicative model.
 TIME SERIES ANALYSIS

• Represents a particular observation as the sum of

its components.
Additive Model • Components: Trend (T), Seasonal variations (S),
Cyclical variations (C), Irregular variations (I).
• Mathematical representation: 𝑂=𝑇+𝑆+𝐶+𝐼

• Represents a particular observation as the product of its

Multiplicative Model components.
• Components have a multiplicative relationship.
• Mathematical representation: 𝑂=𝑇×𝑆×𝐶×𝐼

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 PROBLEM LITERATURE REVIEW

OBJECTIVES HYPOTHESIS

Model Evaluation and IMPLEMENTATION RESULT

Interpretation
CONCLUSION RECOMMENDATIONS

METHODOLOGY
THEORETICAL

INTRODUCTION
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 Assessing Model Fit and Performance Metrics

Assessing model fit and performance metrics are crucial steps in quantitative analysis to
evaluate how well a statistical or mathematical model captures the underlying patterns of the
data. This process is essential for determining the effectiveness, reliability, and predictive
power of a model. Here’s a detailed overview of the key aspects:
Model Fit 01 02
R-squared (R²) Adjusted R-squared

Model fit refers to how well a model's Measures the proportion of variance Modified version of R² that adjusts for the
predictions match the actual data. in the dependent variable that is number of predictors in the model,
Several statistical tests and criteria can predictable from the independent providing a more accurate assessment in
be used to assess model fit variables. It ranges from 0 to 1, the presence of multiple variables.
where higher values indicate a better
fit.

03 04
Chi-square Test F-test

Commonly used in categorical Used in regression analysis to

data analysis to determine how compare model fits and determine
well observed data match the if the mean squares between
expected outcomes under the models are significantly different.
model.
 Mean Absolute Error
(MAE)

Performance Metrics Regression Metrics The average of the absolute

differences between predictions
and actual observations.

Performance metrics are used to evaluate the

accuracy of predictions made by a model,
especially in classification or regression tasks
Mean Squared Error Root Mean Squared
(MSE) Error (RMSE)
The average of the squares of the Square root of MSE; commonly
errors; more sensitive to outliers as used because it is in the same units
compared to MAE. as the response variable.

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 Accuracy
• The proportion of correct
Performance Metrics Classification Metrics
predictions (both true
positives and true negatives)
among the total number of
cases examined.
Performance metrics are used to evaluate the
accuracy of predictions made by a model,
especially in classification or regression tasks
Precision and Recall F1 Score
• Precision measures the accuracy
• Harmonic mean of precision
of positive predictions. Recall, or
and recall. It is a better
sensitivity, measures the ability of
measure than accuracy on
a model to find all relevant cases
imbalanced datasets.
(true positives).

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 Cross Validation

Cross-validation is a technique used to

evaluate how the results of a statistical
analysis will generalise to an
independent data set. It is mainly used in
settings where the goal is prediction, and
one wants to estimate how accurately a
predictive model will perform in practice

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 SOME REAL LIFE
EXAMPLE
1 Marketing Analytics: Predicting Customer Churn

2 Finance: Credit Scoring Models

3 Healthcare: Disease Prediction Models

4 Retail: Sales Forecasting Models

5 Real Estate: Property Price Prediction Models

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SENSITIVITY ANALYSIS AND TESTING
ASSUMPTIONS

In quantitative analysis, sensitivity

analysis and testing assumptions are
pivotal techniques that help validate
the robustness and reliability of
models. Here’s an in-depth look at
both:

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 SOME REAL LIFE
EXAMPLE
1 • Define the scope: Identify the model to analyze and the outputs that
are most critical for the analysis.

• Identify input variables: Determine which variables to test and their

2 range of variation.

• Vary inputs: Systematically vary inputs one at a time or use a

3 multivariate approach where multiple inputs are varied
simultaneously to understand interaction effects.

• Analyze outcomes: Observe how output variables are affected by

4 changes in input variables. Use graphical tools like tornado charts

for univariate analysis or scatter plots for multivariate analysis.
 UTILIZING THE QUANTITATIVE ANALYSIS
MODEL FOR DECISION MAKING

Integration into Decision-Making Processes

1 Align model with marketing goals and objectives

Integrate model into marketing decision-making workflow

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3 Collaborate between marketing and data analysis teams.

4 Ensure iterative and adaptive integration process.

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 CASE STUDIES AND
PRACTICAL
EXAMPLES

1 • Retail pricing strategy optimization case study

• Social media marketing campaign effectiveness case

2 study

• Real-world example that could be "Aarong". They might use

3 quantitative analysis models for various purposes such as
inventory management, pricing optimization, and customer
segmentation.
 MONITORING
PERFORMANCE

1 Effectiveness Metrics: accuracy, precision, predictive power.

Efficiency Metrics: processing time, scalability.

2
Business Impact Metrics: revenue growth, cost savings.
3
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 Data Quality Validation Techniques
Management
• Rigorous Data Collection • Cross-Validation
Ensuring the • Data Governance Framework • Sensitivity Analysis
Reliability of • Continuous Monitoring • External Validation

Quantitative Regular Updates and

Business Models Calibration
• Adaptation to Market
Dynamics
• Alignment with Consumer
Behavior
• Optimization of Model
Performance
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 Identification of Mitigation Strategies
Limitations
• Refining Algorithms
• Data Quality Issues
• Assumptions and
• Expanding Data
Simplifications Sources
• Limited Scope • Integrating
Addressing Limitations and • Human Judgement Qualitative Analysis
Considering Future Enhancements
Future Enhancements

• Advancements in
Technology
• Methodological
Innovations
• Data Analytics Techniques

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 CONCLUSION

Understanding the problem and setting clear goals is essential for

1 choosing the right method.

Testing the model's accuracy before using it for decisions helps ensure it
2 gives the right answers.

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Thank
You