Financial Development in Statistical Analysis

The statistical approach is applied to a wealth of information obtained from data analysis of a financial development. The financial activity most often has an element of uncertainty or variability and statistics helps to ascertain the risk in such financial undertaking or decision making. There are some caveats or serious limitation to this approach. Financial development is linked to economic development and the statistical method sheds a light on the global or local welfare of such a decision making process. Statistical analysis is undoubtedly interlinked to financial development.

Statistics has a ubiquitous presence in all financial development. For instance, credit modeling uses different statistical concepts such as correlation, logistic regression, weights of evidence and more. Statistics plays a significant role in measuring operational risk. It is also paramount in understanding pricing derivatives and market risk. Pricing and portfolio management also use statistical methods to understand the risk associated with a portfolio. Such estimation of risks allows people to take the appropriate measures. Statistical modeling techniques are frequently used in fraud detection, in managing attrition rates and in identifying serious prospects during sales campaigns. Statisticians are developing their core skill set to give validation to different financial data that are used by investors, sales team, and HR. Statistics empowers decision makers to draw objective conclusions from financial data where the results are not concrete but probable.

Statistics is required for many aspects of the business. It helps in monitoring of budgets, measuring the performance of an organization, helps in the formulation of policies, and also helps in preparing documents for submission to regulatory authorities. Statistics are equally important in understanding the economic affairs and development of a country, which falls under the category of macro finance. Statistics helps to understand the existing per capita income, population growth rate, the rate of unemployment, the need for housing, better schooling, and medical facilities.

On a micro level statistics is also critical to understand the financial health of a business or an organization. Accountants frequently use the statistical method to ascertain if the business is generating sufficient income or not. Statistics empowers business men to make fast and accurate decisions. It helps business owners understand demand and supply. It makes him aware of the demands of the customers and also allows him to know the inventory; what goods to sell and in what quantities will they be demanded. With the help of statistics, business owners can decide what the best way to market is and sell his products.

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