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Quantitative analysis

Barry McNamara
Wendine Thompson-Dawson
Any second-year chemistry major is familiar with quantitative analysis, but at Monmouth, business students are increasingly making use of their skills to analyze risks, probability and outcomes based on their own version of the technique.

Quantitative analysis has been a key element in the study of economics, and it is now becoming a major part of the curriculum in the department of political economy and commerce (PEC), where assistant professor Wendine Thompson-Dawson is one of its leading advocates.

“My Ph.D. work in economics (from the University of Utah) was very math-oriented,” she explained. That’s understandable, because she earned her bachelor’s degree from Boise State University in mathematics, as well as economics.

In the world of PEC, quantitative analysis is a business and financial analysis technique that seeks to understand economic behavior by using complex mathematical and statistical modeling, measurement and research. By using historical data, financial models are created and, from those, projections can be made.

“These models are quite useful, since change is a constant in business,” said one of Thompson-Dawson’s departmental colleagues, marketing specialist Don Capener. “Both in the business world and here at Monmouth, quantitative analysis is used to attempt to mathematically project results.”

He continued, “This Christmas season was predicted to be stronger than last year. How did economists predict that outcome? Financial models are the tool. Companies use them to decide on production levels, employment needs, productivity and inventory control. As the financial variables change for a company, the model allows variables to be substituted for different scenarios.”

“I certainly view quantitative analysis as a foundational element,” said Thompson-Dawson. “This department has had a good emphasis on it.”

That was especially true during the tenure of emeritus professor Rod Lemon, whose math skills were legendary. The Department of Energy and other federal and state agencies frequently sought Lemon’s analysis on issues relating to natural gas.

“We’d like to continue that emphasis on quantitative analysis and make sure it’s a key element of the department,” she added.

Capener said the emphasis will help the department reach a number of students contemplating a career in business, who “shy away from it because they are afraid it’s too complicated to learn.”

Currently, Thompson-Dawson teaches a quantitative methods class, as well as “Introduction to Econometrics.”

“We use practical mathematics and statistical techniques, from basic math, to algebra and geometry, all the way up to regression analysis, to solve business and economic problems,” she said.

A recent example from one of her classes, she said, was analyzing the effects on the economy by the government exercising a price ceiling on the market.

“We do as many hands-on problems as possible,” she said, even employing data from her mother-in-law’s time as a quality control manager for a company that provides french fries to McDonald’s. “We take these theoretical frameworks and apply them to practical problems. We teach both the economics and business students things they will use in a practical way – what they’ll need to do in their employment. It’s my long-term goal that we’ll integrate quantitative analysis into every PEC class.”

When explaining the department’s short-term goal, Thompson-Dawson said, “We make sure our students understand how to use Excel spreadsheets as a tool. For the next catalog year (2011-12), our majors will be required to take what is essentially a ‘spreadsheet’ class (‘Business Problem Solving’). It will be one of three required courses – along with ‘Quantitative Methods’ and a business stats class – that will provide a foundation for the skills students need to do financial analysis and projections. Students will learn basic intuition and basic math skills, as well as statistical skills such as probability distributions, hypothesis testing, p-values and multi-variate regression analysis.”

The logic, she explained, is that by “enhancing the front end of the program, students will be able to do more in 300-level classes, and professors can step up the rigor in those classes and their capstone classes, too … These are the tools of the trade. Students have to know how to do these skills to be successful, not just professionally, but in their households and as citizens, too.”

One of her former students, Dan Krueger ’10, provided Thompson-Dawson, as well as her students, with confirmation of that fact.

“Dan is pursuing his MBA at the University of Iowa,” Thompson-Dawson said. “He e-mailed me after the first day of grad school and said, ‘I’m so glad you taught me how to do quantitative analysis and how to use Excel. The syllabus says we’re going to be doing the stuff you taught us from Day 1.’ I made sure my class knew about that e-mail. As a professor, you do everything you can to motivate them to pay attention and let them know how what you’re teaching applies to them.”

“Monmouth’s quantitative method courses taught me the fundamentals methodologies for data analysis,” said Krueger. “I used direct application of these methods in a ‘Data and Analysis’ course I completed this fall in which we analyzed case studies and determined an appropriate course of actions through applying the various analysis techniques.

In addition to graduate school, Krueger also work full-time in information technologies network administration and engineering for HNI Corporation, and his training in quantitative analysis has helped him there, too.

“In my current HNI position, one of my responsibilities involves analyzing trends in corporate-wide network bandwidth usage,” he said. “We use the trend analyses to proactively predict the need for design changes in our technical infrastructure. The trend analysis allows us to stay ahead of the always-changing business needs.”

Monmouth’s students not only get a healthy dose of quantitative analysis in the classroom; they also have an exciting way to use it as an extracurricular activity.

“We have a group of students who are using research and quantitative tools to invest in the market through our Student-Managed Investment Fund,” said Thompson-Dawson. “Students do the research, and they act as a financial analyst would for an investment brokerage firm. It’s completely extracurricular – they don’t receive academic credit. At any given time, there are five to 15 students working on things like 15- to 20-page research reports, just as a professional would. They meet every other month and vote as a group on whether to buy, sell or hold the researched stocks.”

There are probably students in that group who never dreamed they would be so involved in economics at the college level. According to Thompson-Dawson, that’s because they often know little about the subject prior to coming to Monmouth.

“Few students come to college thinking they will major in economics, because they aren’t exposed to it much, if at all, in high school,” she said. “They leave high school not really knowing what economics is. Once they’re here, though, they have a tendency to switch over to an economics major because they really see the value of it.”

One source on quantitative analysis noted that “it can also be used to predict real world events such as changes in a share price” of a publicly-traded stock.

It’s not so hard to see the value in that. Used in that context, one could even think of quantitative analysis as “insider trading,” but without a mandatory stay in a minimum-security prison.