NuclearPhynance Archive

Hi geniuses,



I'm in the cmu bachelors comp finance program--math is fun (who doesn't like getting the right answer). Enough preamble: is qualitative analysis dead? I was reading fortune the other day and there's an exhausting number of articles about momentum trading...I see some guy on NP; "who reads 10-K's in this day and age", etc. Just curious because it seems like the superlative example of investment prowess is buffet--who continually makes remarks about the silliness of calculus, as though that's complex. Just curious because I'm not really interested in being a millionaire. A billion sounds way better.

To answer your question, no.

I agree, calculus in the wrong context is silly. For investments and economics maths is quite useless.



Funny thing is that Buffett started out as a quant of sorts, because Graham was almost a pure mechanical investor, see Graham's security analysis and Schloss lectures (1).



Could there be an holy grail for estimating the earnings for each component of the Dow over the next 10 years? I highly doubt it. However there a few concepts which are very helpful. For example the notion of confidence (not in a strictly statistical sense). You buy stocks when are you very confident about your projections (if you buy them for growth).



Note this forum has little to do with investing, almost all people here are traders as far as I know. The mind set is completely different. In investing qualitative analysis almost always beats quantitative analysis as long as the rough quantitative framework is right (see Pabrai's book). An investor doesn't mind volatility, traders hate it. What would you do if you buy a stock and it falls 50% the next day? An investor doesn't mind, because the business hasn't changed.



"Just curious because I'm not really interested in being a millionaire. A billion sounds way better."



I would say the chances are roughly 10^-6



(1)

http://www7.gsb.columbia.edu/valueinvesting/coursesfaculty/recordings