This question is borne out of personal experience. I'm a PhD in social sciences who also holds a master's degree in finance and is relatively well-versed in both quantitative and qualitative research methods. Until very recently, I had no work experience in the financial industry. I've been in the academia all along, writing papers and doing empirical sociological research (e.g. surveying various stakeholders, doing in-depth interviews, focus groups, etc.) focused on emerging technologies. The goal of this research was non-commercial, as it aimed at developing policy recommendations or guidelines for governing/regulating new technologies. Not long ago, I was approached by a group of portfolio managers at an asset management firm (primarily private equity) who were considering investing in a specific emerging technology within the biotech industry. They had read a paper by me where I reported results of an interview study with experts in that technology. I was asked if I could use my familiarity with the landscape to perform another qualitative study for the asset manager, this time with the aim of gaining investment insights. I agreed and performed the study: re-interviewed a small number (<10) of leading industry experts, analyzed the interviews and synthesized the findings in a concise, reader-friendly report. I also summarized the available peer-reviewed scientific literature on the technology in question and did a little bit of financial modeling to illustrate several scenarios for the relevant future market. However, about 90% of the work was purely qualitative in nature. In the end, I came up with specific investment recommendations which the portfolio managers were happy with and subsequently chose to follow.
Based on this experience, I can certainly see how qualitative research can help an asset manager minimize uncertainty around a particular investment idea and make a more informed investment decision. However, I am not sure how often, and to what extent, qualitative research is used in investing. I assume that asset managers which predominantly invest in listed companies may be less inclined to perform qualitative research, as this would routinely reveal material non-public information about listed companies, which is illegal to act upon. However, in the context of private equity, venture capital, and M&A, I believe qualitative research can be of significant added value. What are you thoughts about, or experiences with qualitative research in investing?
Submitted October 03, 2017 at 07:28AM by Septuagint http://ift.tt/2hJfhry
