How to Become a Quantitative Analyst [+ Salary & Career Guide]
Quantitative analysts (often called “quants” for short) are described by Investopedia as “the rocket scientists of Wall Street.” Currently in high demand thanks to their advanced skills in mathematics, finance, and technology, quantitative analysts typically command high salaries. How high?
Read on to learn more about:
- Quantitative analyst salary data
- Quantitative analyst job growth and career outlook
- Companies across industries hiring quantitative analysts
- Quantitative analyst hard skills and soft skills
- How to become a quant
- Quant career paths and educational requirements
- Answers to frequently asked questions
What is a Quantitative Analyst?
Quantitative analysts are professionals who specialize in “the design, development, and implementation of algorithms and mathematical or statistical models intended to solve complex financial problems,” according to the Corporate Finance Institute. “In their work, quantitative analysts apply a blend of techniques and knowledge from multiple disciplines including finance, economics, mathematics, statistics, and computer science.”
Investopedia defines quantitative analyst as: “A professional who uses quantitative methods to help companies make business and financial decisions. Investment banks, asset managers, hedge funds, private equity firms and insurance companies all employ quantitative analysts to help them identify profitable investment opportunities and manage risk.”
Quants are in particularly high demand in the world of investing and securities trading because of their ability to develop valuable insights intended to give their employers a competitive edge. “While the computer algorithm does the grunt work, it is quantitative analysts who are the brains behind these algorithms,” says Investopedia. “The best in the business make their employers millions of dollars on a monthly basis simply by programming algorithms that are fast and efficient enough to locate the best trades before the competition.”
What Does a Quantitative Analyst Do? (+ Average Day)
For those with the right skills, education and experience, “a position as a quantitative analyst is financially lucrative and intellectually stimulating,” according to QuantStart. However, “the competition for roles is tough, especially within top tier funds and investment banks.”
Commonly employed by a broad spectrum of financial industry organizations (securities firms, commercial banks, investment banks, wealth management firms, hedge funds, etc.), quants are also employed by insurance companies, accounting firms, management consulting organizations, and financial software companies, among others.
Often their core responsibilities revolve around using advanced quantitative methods to scope out opportunities and evaluate risk. The work of a quantitative analyst is nearly always connected to quantitative research; according to Street of Walls, financial industry quants are typically focused on:
- Improving the trading architecture used to place trades
- Improving the signals used to evaluate trade ideas
- Reducing transaction costs and/or market impact
- Managing portfolio risk
- Testing and deploying new trading strategies
Street of Walls notes that daily activities may include:
- Reading academic literature to help ground trading strategies in theory
- Creating and testing a hypothesis for a given trading strategy
- Back-testing the strategy with existing data on an out-of-sample basis using actual transaction costs
- Programming and implementing the trading strategy
- Stress-testing the strategy to gauge environments in which the strategy may fail to perform
- Creating a risk-management framework for implementing the strategy and proposing a systematic method for increasing or decreasing portfolio risk
The work is often considered challenging to explain in layman’s terms. In this Investopedia video, three quantitative analysis professionals talk about the nature of their work, including one who needed to figure out a way to “explain what I do to my mother.”
Quantitative Analyst Career Outlook [Demand is High]
In the trading world, quantitative analysts are especially in demand. “As financial securities become increasingly complex, demand has grown steadily for professionals who not only understand the complex mathematical models that price these securities, but who are able to enhance them to generate profits and reduce risk,” reports Investopedia. Demand for talent driven by these and other factors:
- The rapid growth of hedge funds and automated trading systems
- The increasing complexity of both liquid and illiquid securities
- The need to give traders, accountants, and sales reps access to pricing and risk models
- The ongoing search for market-neutral investment strategies.
How Much Does a Quantitative Analyst Make?
Six-figure salaries and above are the norm for quantitative analysts. Salary figures tend to vary widely (and estimates from employment websites are often updated in real time), but reports of $100,000+ salaries are consistent across the board for quantitative analysts.
The U.S. Bureau of Labor Statistics reports the following average and upper-level salaries for financial and investment analysts, by sector:
- Securities, commodities, etc. – $125,040
- Investment pools and funds – $132,350
- Software publishing – $110,930
- Other information services – $110,150
Here are some additional examples:
Compensation for highly skilled quants at hedge funds and other organizations may also include large bonuses, according to Street of Walls, which quotes a survey showing an average total compensation of $230,000.
Companies (By Industry) Hiring Quantitative Analysts
Anyone who is curious about how to become a quant will also be interested in taking a closer look at the vast array of big-name and lesser-known companies who are looking to hire quantitative analysts.
As mentioned above, a lot of the action is in the financial industry, but there are also career opportunities for people skilled at quantitative analysis in insurance, accounting, software, consulting, social media, and more. During a recent LinkedIn search, the NFL’s Philadelphia Eagles were seeking a “Quantitative Analyst – Football Operations.”
A recent LinkedIn search provides a look at some of the best-known organizations seeking quantitative analysts, including:
- Fidelity Investments
- Bank of America
- Goldman Sachs
- Magnetar Capital
- Penn Mutual
- Navy Federal Credit Union
- The Motley Fool
- Capital One
- And countless more
Quantitative Analyst Hard Skills
“In general, quantitative analysts use their mathematical and statistical skills to detect market changes,” says Study.com. “Advanced knowledge of calculus, engineering and game theory is key; programming skills are essential, particularly in C++. A strong background in modeling with large amounts of data is also mandatory.”
In terms of the key skills, knowledge, and aptitude needed to excel as a quantitative analyst, the bar is pretty high. Not all of these skills are needed for every job, but the following are some of the key skills and subject areas that help position quants for career success:
Investopedia emphasizes advanced understanding of mathematical computation, including:
- Calculus (including differential, integral, and stochastic)
- Linear algebra and differential equations
- Probability and statistics
Other sources make reference to:
- Strong abilities in data mining and data analysis
- Extensive financial knowledge
- Programming skills
- And, of course, software skills
Advanced software skills are “critical to job performance,” reports Investopedia. “C++ is typically used for high-frequency trading applications, and offline statistical analysis would be performed in MATLAB, SAS, S-PLUS or a similar package. Pricing knowledge may also be embedded in trading tools created with Java, .NET or VBA, and are often integrated with Excel. Monte Carlo techniques are essential.”
Quantitative Analyst Soft Skills
As in many higher-level analyst and data science-related jobs, well-rounded soft skills are also essential, with many job listings emphasizing excellent written and verbal communication skills. This is because, in addition to generating high-value work product, analysts must be skilled at documenting and presenting their findings to others within their organization.
Other general, less technically specific skills include:
- Teamwork and collaboration
- Problem solving
- Proficiency at research
- Leadership capabilities
Paths to Become a Quantitative Analyst [Degree vs. Non-Degree]
There is some non-degree-oriented training you can do to enhance your chances for career success, but most quantitative analyst jobs require an advanced degree and in some cases a Ph.D. Examples of industry certifications pursued by some professionals in this field include a Chartered Financial Analyst (CFA) designation or a Certificate in Quantitative Finance (CQF).
Education Requirements for a Quantitative Analyst
When hiring quants, “most firms look for at least a master’s degree or preferably a Ph.D. in a quantitative subject, such as mathematics, economics, finance, or statistics. Master’s degrees in financial engineering or computational finance are also effective entry points for quant careers,” says Investopedia. Other master’s degrees that connect to the field of quantitative analysis include:
- Data science
- Mathematical finance
- Probability and statistics
- Financial engineering
Because of the strong emphasis on working with data and using advanced skills to uncover actionable insights, an advanced degree in data science can be an extremely helpful stepping stone.
The Corporate Finance Institute reports, “The rapid introduction of data science and machine learning in finance [has] increased the demand for candidates with the relevant educational background in said fields.” And Wall Street Mojo cites data science as one of four key areas of expertise, saying, “To be able to thrive in this career, you need to be amazing at four specific subjects – mathematics, data science or software, finance, and application development.”
Quantitative Analyst vs. Other Similar Job Titles
Here are some additional job titles in quantitative analysis and related fields:
- Quantitative Trader
- Quantitative Researcher
- Quantitative Developer
- Financial Engineer
- Investment Analyst
- Risk Analyst
- Quantitative Portfolio Manager
- Data Analyst (Finance)
- Quantitative Software Engineer
- Quantitative Investment Manager
- Manager, Data Science and Analytics
- Data Scientist, Consumer Analytics
Quantitative Analyst vs. Data Scientist [Similarities and Differences]
“Quants and data scientists have more in common than you might think. The differences between them are shrinking as tech plays a more prominent role in finance.”
That’s the intro to a report on the similarities and differences between these two roles that rely on advanced analytical skills to derive valuable business insights from complex sets of data.
One of the biggest differences is that skilled data scientists have perhaps a broader horizon of potential career pathways, since quants are employed largely by sectors dealing in high finance and risk analysis.
The report mentioned above also cites noted finance columnist Matt Levine arguing that “there is no hard-and-fast dividing line between quants and data scientists, and that eventually, the baseline expectation for quantitative analysts will be fundamentally the same as those for data scientists.”
In a 2018 Bloomberg column titled “Quants Might Not Be So Special Someday: In the Future, Everyone Will Be a Data Scientist,” Levine envisions a future in which “every reasonably sophisticated investment firm will have a data science department.” Learn more about the Data Scientist vs. Quantitative Analyst debate in these articles by Springboard and Noodle.com.
A data science master’s degree, such as the online Master of Science in Applied Data Science, will typically offer a solid foundation in technical and soft skills that are also extremely valuable to aspiring quants, including the widely used open-source programming languages Python and R.
FAQs About Quantitative Analyst Careers
Q: What is the average salary for a quantitative analyst?
A: Salaries for quantitative analysts often range well above $100,000. Employment website Indeed cites an average salary for a quantitative analyst in the U.S. of $134,000.
Q: What are the key differences between quantitative analysis and data science?
A: One of the biggest differences is that quantitative analysts are highly sought after in the finance sector, while data scientists are in demand across a far broader range of industries, including financial services, technology, cybersecurity, media, health care, retail, manufacturing, and more.
Q: Would a master’s in data science help me pursue a career as a quant?
A: Yes. A strong data science master’s degree engages graduate students in many of the same technical and soft skills that are also extremely valuable to aspiring quantitative analysts.