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Investment Modeling Definition and Quiz

A comprehensive and broad approach characterized by breadth and diversification instead of focus and concentration.
  1. Define - Define investment modeling.
  2. Context - Use investment modeling in a sentence.
  3. Quiz - Test yourself.
face pic by Paul Alan Davis, CFA
Updated: February 17, 2021
Between trading algorithms, quant models and systematic investing, investment modeling goes by many names. See the distinctions below.

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How Investment Modeling compares with Financial Modeling


Investment Modeling is the process of deriving the value of a set of public securities, taking into consideration factors such as risk, liquidity, valuation and correlation with other securities. It involves more broad comparisons than typically performed in financial modeling, so the data is typically too vast for a spreadsheet.

Synonym: systematic investing, quantitative investing

For context, it's important to realize that technology has made a slow but consistent impact on the invesment industry since the 1950s. Since then, the number of professional and individual investors who utilize computers to select investments has grown substantially. There are many buzzwords that refer to versions of investment modeling; including, smart beta, algorithmic investing and quantitative modeling.

Investment modelers typically go beyond the limits of a spreadsheet and use computer programs to evaluate many different varibles for many different companies. This approach benefits from a more structured, consistent and unbiased process than subjective investing does.

In a Sentence

Doc:  Investment modeling helps to explain how the whole investment process is performing, not just one or several stocks.
Ali:  Isn't that really all clients should care about?


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Questions or Comments?

Still unclear on Investment Modeling, well we have a free tutorial series with 27 videos and a freely available data set to be used in Excel. See Quant 101.


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Which is easier and more cost-effective to scale when the coverage list is hundreds of stocks? | Financial Modeling or Investment Modeling

Investment Modeling

Which of the following would not be considered an investment modeling approach? | Factor Investing, Fundamental Analysis, or Statstical Arbitrage

Fundamental Analysis

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/ factorpad.com / fin / glossary / investment-modeling.html

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risk modeling
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liquidity modeling
correlation of investments
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statistical programming
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