Quantitative and qualitative research in finance
Quantitative and qualitative research in finance

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Quantitative and qualitative research in finance

1 What is qualitative research?

While it has become common to distinguish between qualitative and quantitative approaches, some researchers argue the need for combining these two types of method, and there are those who challenge the distinction itself. For example, they argue that it obscures both the considerable diversity that exists under each heading and also important overlaps. These are certainly vital points to be aware of, but the distinction between qualitative and quantitative approaches nevertheless points to some significant differences in orientation among social researchers.

It is important to identify the key features of a qualitative approach. The points in the following video give you an initial idea of the three distinctive features of qualitative research.

If you are finding the text in the video too small to read, you can see the full text in the video transcript.

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1. It tends to adopt an exploratory orientation in research design. The starting point is not usually a well-defined theory or a specific hypothesis but rather a much more general interest in a particular problem, issue, situation or group of people. And a major part of the research process is concerned with clarifying and developing the research problem, this being done alongside the processes of data collection and analysis.
2. Qualitative researchers work mainly with unstructured data, in other words with data that are not structured in terms of analytic categories at the point of collection. As a result, they tend to use the following sorts of material:
Documents of various kinds: official or personal, paper-based or electronic, consisting of text and/or images, extant or elicited.
Observational data produced through the researcher writing open-ended fieldnotes in which what is observed is written down in plain and concrete language, and/or through audio- or video-recordings that are subsequently transcribed.
Data from interviews that are relatively unstructured, in other words that do not involve asking a set of pre-specified questions, even less offering informants a choice from pre-specified answers. Instead, the aim, for the most part, is to encourage informants to talk in their own terms about matters that could be relevant to the research. Once again, the data will be recorded by means of fieldnotes, and/or more usually by audiorecording and transcription.
3. The third feature follows from the second. It concerns the kinds of evidence used in research reports, and the forms of argument employed there. In general, numerical data are not central to the account, and nor is there usually much, if any, reliance on statistical analysis. The aim is to document the perspectives, activities or practices of people, to understand these in their contexts, and to explain their character, causes, and/or consequences, relying primarily on verbal forms of analysis.
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There is some truth in that qualitative and quantitative research are each suitable for answering different types of questions. For instance, if we are interested in capturing the systematic component of risk for securities held by ordinary investors, then we must necessarily engage in quantitative investigation. By contrast, if we were asked to provide an account of how ordinary investors perceive of risk then qualitative research is the best approach. However, much qualitative and quantitative research is actually concerned with answering similar sorts of questions. In such cases, the adoption of one approach rather than the other usually stems from what the researcher believes to be necessary in order to produce an adequate answer, and/or from the nature of the data that are likely to be available.

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